Frank raps SEC rules on reporting pay
WASHINGTON -- The Securities and Exchange Commission is coming under congressional criticism for a last-minute decision to reverse course and loosen executive-pay disclosure rules.
Representative Barney Frank, incoming chairman of the House Financial Services Committee, said he is "very disappointed with both the substance and the procedure used to reach the SEC's Christmas Eve decision to loosen reporting requirements for the pay of the top executives of public corporations."
The SEC late Friday said new rules would lower the amount of total compensation that companies must disclose next year. The rules would spread out the value of options and restricted stock awards over a number of years, rather than in the year in which the options were granted. Businesses had lobbied for the change, but the SEC at first had not agreed.
"Backtracking by the SEC on this important matter of stock options reinforces my determination that Congress must act to deal with the problem of executive compensation that is now unconstrained by anything except the self-restraint of top executives, a commodity that is apparently in insufficient supply," said Frank, a Massachusetts Democrat.
An SEC spokesman was not immediately able to comment.
Executive pay is becoming an increasingly hot-button issue as the gap in pay between rank-and-file employees and top executives widens. The SEC this year approved rules that will provide more information about the pay and perquisites granted to top executives. The new pay details will be released mostly in early 2007, when companies file annual proxy statements.
SEC rules require companies to report total compensation for the chief executive, chief financial officer, and the three other most highly paid employees, all in a single number representing total compensation. Originally, the total compensation would have reflected the value of stock options on the date of the grant. Now, the total compensation will reflect the value of only those stock options that have vested.
Companies will still have to disclose the number of stock options granted to top executives. Those figures simply won't be fully reflected in total compensation.
"At least it's disclosed somewhere," said Ann Yerger, executive director of the Council of Institutional Investors. Still, she said, the changes the SEC announced last week will muddy what was supposed to be "a very clear snapshot."
