Home Delivery

hed here

BY TAMI LUHBY | Newsday Staff Writer

Article tools

E-mail

Share
- Digg
- Del.icio.us
- Facebook
- Fark
- Google
- Newsvine
- Reddit
- Yahoo

Executive pay packages may be growing more lavish, but disclosure of all the perks and benefits remains pretty stingy.

That could change soon.

Public companies would have to publish many more details about their top dogs' total compensation -- including perks, stock options and retirement benefits -- under a proposal being considered by the Securities and Exchange Commission. The regulator is expected to adopt the changes, the largest revision to disclosure rules since 1992, and they would take effect beginning with 2007 proxy filings.

While the agency's commissioners say they don't want to regulate how much executives are paid, they think shareholders deserve to know more about it. Disclosure rules haven't kept up with the many changes in compensation practices.

"No shareholder should need a machete and a pith helmet to go hunting for what the CEO makes," Christopher Cox, the agency's chairman, said earlier this month at a dinner with financial journalists.

Also, to address a recent scandal involving options backdating, Cox said the agency will require companies to disclose the full value of an option based on the date the award was made. It also is considering other measures. More than three dozen U.S. companies are under investigation for improperly pushing back the dates of options grants so that executives could benefit more from stock-price increases.

Option grants often allow executives to buy stock at its value on a certain date. If the company's share price rises, so does the value of the option. Backdating the option can set the purchase price at the lowest cost possible, which raises corporate governance and financial reporting issues.

Critics of generous executive pay packages have applauded the proposed changes, saying the clarity will help shareholders better judge whether compensation is truly tied to performance, as many companies claim. Compensation experts and companies, meanwhile, have said they aren't opposed to the increased disclosure as long as they aren't forced to give away corporate secrets.

Here are some figures that would be reported:

Total compensation.

Dollar value for all stock-based awards, including options and stock grants, for current year as well as outstanding awards from the past.

Increase in actuarial value of pension plans.

Perks worth more than $10,000 (down from $50,000 now).

Amount of annual compensation realized on exercised options and vested stock.

Potential payouts and benefits in the event of retirement, termination or change in control of the company.

Providing these details should intensify the debate about soaring executive compensation, Cox said.

"The $20,000 oriental carpet, the $8,000 horse, the free company jet in retirement, or the half-million-dollar consulting deal that keeps paying your heirs even after you die -- those cases will attract a lot of attention, and they'll give shareholder activists new opportunities to call for better discipline," he said.

Still, the new rules aren't likely to affect the dollars flowing into executives' pockets, experts said. Fewer than one in 10 companies plan to change their compensation packages in response to the proposal, according to a March survey by Watson Wyatt Worldwide, a human resource and financial consulting firm.

"For a lot of companies, what they are doing makes sense," said Diane Lerner, a Watson Wyatt senior consultant.

But corporate directors would have to more fully describe compensation policies, listing the objectives of the executive compensation program as well as its various components. For instance, directors would be required to specify which elements of corporate performance are taken into account when setting compensation policies and making pay decisions.

Compensation critics have long complained that directors use boilerplate language to justify pay packages. Even under the proposal, companies won't have to reveal all their yardsticks -- a bit of leniency granted for competitive reasons.

Though the proposed rules are an improvement, they don't go far enough, said Alyssa Ellsworth, managing director, Council of Institutional Investors, a membership group of the nation's largest pension funds.

"We don't know whether they are being paid for good performance or for how many doughnuts they can eat before breakfast," she said.