SEC mostly upbeat on new proxy rules

SEC mostly upbeat on new proxy rules

	Published : Mon, 11 Jun 2007 14:40 By : Agencies Print this Story

WASHINGTON (AP) - The nation's top securities regulator says he is generally satisfied that new disclosure rules are giving investors a clearer picture of how much public companies are paying top executives and provide useful insight into the reasoning underlying compensation awards.

'Nothing was more complicated than the description of executive compensation,' Christopher Cox, chairman of the Securities and Exchange Commission, said in an interview last week. Before the SEC revised the rules last year, he said, the implicit instruction was: 'It's all in here somewhere -- go find it.'

'The difference in 2007 is extraordinary,' said Cox. 'The new executive compensation disclosure marks a sea change.'

Cox said he is not concerned that The Associated Press, credit-rating agency Moody's Investors Service and others have developed formulas that differ from the SEC's requirements for calculating the components of the summary compensation table of proxy statements.

Under the SEC rules as they were initially adopted in July, the full amount of option and stock awards to executives had to be listed for the year as a lump sum on the summary table.

The SEC made a change last December allowing companies to list a smaller amount for the first year and spread the remainder over later years as executives become eligible to exercise options. A company estimate of options' present value is listed in a separate table.

The AP's formula is designed to zero in on the value of all compensation awarded to CEOs in the previous year. It includes salaries, bonuses, perks, above-market interest on pay that is set aside for later and what companies estimated the present value to be of restricted stock and options awards on the day they were granted last year.

SEC officials say that under the current rules for listing options awards in the summary table, some companies report a higher total compensation number than under the AP approach, while other companies post a lower number.

Based on an SEC review of reports from nearly 300 companies, they are roughly split in half, Cox said, 'virtually a wash.'

Of the AP's five most highly compensated CEOs, three executives -- Yahoo Inc.'s Terry Semel, XTO Energy Inc.'s Bob Simpson and Danaher Corp.'s H. Lawrence Culp Jr. -- were found to have earned more under the AP's formula than the SEC's formula. But the total was higher on the summary compensation table in proxy statements for Occidental Petroleum Corp.'s Ray Irani and Merrill Lynch & Co.'s Stanley O'Neal.

'There are pluses and minuses to both of these approaches,' he said, adding that the SEC's formula is consistent with the way companies account for option awards in their financial statements.

One thing Cox hasn't been shy about criticizing is the prevalence of verbal boiler plate, legalese and jargon in proxies despite the SEC's call for a plain-English approach.

'Already we are seeing examples of over-lawyering that are leading to 30- and 40-page-long executive compensation sections in proxy statements,' Cox said in a speech in March at the University of Southern California. 'I have to report that we are disappointed with the lack of clarity in much of the narrative disclosure that's been filed with the SEC so far.'

SEC officials say there's a learning curve for companies in meeting requirements the first time, and they expect most of the verbosity to be remedied by next year's reporting.

Cox, in the interview, said the SEC 'will use the experience of receiving proxy statements during 2007 to determine whether any technical or perfecting changes are needed in the rules.'

He said one change investors can look forward to is the planned application of interactive data-tagging to the executive pay information. The use of so-called XBRL, or extensible business reporting language, beginning later this month, will make it easier for investors to sort through, locate and compare data on executive pay at hundreds of companies, he said.

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