Wednesday, June 3, 2009

SEC Mulls New Non-Executive Level Pay Disclosure Rules


The Wall Street Journal is reporting, overnight, on SEC Chair Mary Schapiro's push to have new pay disclosures in next year's batch of proxy statements -- including an analysis of the "general approach" public companies use to compensate non-executive employees (including highly-bonused salespeople, for example). The article singles out pharmaceutical sales people, thus -- but do go read it all:

. . . .Currently, companies are required to explain executive-pay plans for only its five highest-paid executives. Financial firms, movie studios, pharmaceutical companies and others often have superstar traders, producers or salespeople who are paid more than executives.

The proposals wouldn't require companies to say how much they pay these star performers, but they would have to disclose in more-general terms how lower-ranking employees are paid, especially when it affects the company's overall risk management. That would apply in particular to financial firms, where traders have received big bonuses for executing trades that put the entire company in danger.

"The whole concept of having to disclose . . . compensation practices for nonexecutives is a whole new ball game," said Mark Borges, a compensation consultant with Compensia, a San Francisco-based firm. . . .



What I think important here is the recognition, generally, that excessive compensation -- especially at the sales line -- may lead to perverse results. As ever, more to come.

1 comment:

Condor said...

From SEC Chairman Mary Schapiro's testimony -- on the Hill, yesterday -- at the Subcommittee on Financial Services and General Government of the U.S. Senate Committee on Appropriations (that generated the WSJ news item, above):

". . . .Next month we will take up a broad package of corporate disclosure improvements, all designed to provide shareholders with important information about their company's key policies, procedures and practices, including compensation policies and incentive arrangements. With this additional information, shareholders will be better able to hold directors accountable for the decisions that they make. For example, the Commission will consider proposals to enhance disclosure of director nominee experience, qualifications and skills, so that shareholders can make more informed voting decisions. The Commission will also consider proposed disclosures to shareholders about why a board has chosen its particular leadership structure (whether that structure includes an independent chair or combines the positions of CEO and chair), so that shareholders can better evaluate board performance. Also, shareholders should understand how compensation structures and practices drive an executive's risk-taking. The Commission will be considering whether greater disclosure is needed about how a company — and the company's board in particular — manages risks, both generally and in the context of compensation. The Commission will also consider whether greater disclosure is needed about a company's overall compensation approach, beyond decisions with respect only to the highest paid officers, as well as about compensation consultant conflicts of interests. . . ."