August 31, 2007
The SEC recently took steps to learn more about executive compensation by sending approximately 300 letters to companies critiquing disclosures in this year's proxy statements, and requiring further information. It is reported that senior managers of companies are concerned about this latest initiative, contending that the details the SEC is seeking are deemed competitive and should remain secret. The nature of the information sought by the agency includes the targets and benchmarks companies use when they tie pay to performance. The agency is also seeking more information about the role played by the CEO in setting his own compensation or that of other employees.
The latest SEC action represents the agency's attempts to review new disclosure rules governing executive compensation. The companies that have received the SEC letters of inquiry have been given until September 21 to respond. It is anticipated that the agency will soon issue additional of letters to other companies. This initiative represents the SEC's high priority to revamp executive pay disclosure so that investors have more information about pay and benefits of executives.
AHLA wishes to thank Stuart Silverman, Chair of the Corporate Governance Task Force, for providing this update.