The SEC has proposed new disclosure rules to require companies to make it much clearer to investors how compensation for top executives is linked to financial performance. Correlations between corporate executive pay and shareholder returns are hard to extract from current reports. The proposed new rules would mandate consistent, pay-for-performance metrics that make such links easier to evaluate.
If adopted, some 6,000 public companies would have to disclose top executives’ actual pay, including stock options, in their annual proxy reports. Those figures would be compared in new tables with the company’s annual return to shareholders during the same period, and would also be compared with those of other companies of similar size and type. All information would be published ahead of shareholder voting at annual meetings and would be provided in an interactive data format. The SEC is also working on related rules that would mandate reporting on the pay gap between CEOs and their employees. All of these regulations are aimed at providing more transparency to investors, more accountability for boards of directors, and ultimately, better business practices.
Read the release: http://bit.ly/1c3gemx
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