SEC Revamps Plan on Pay Disclosure
The Securities and Exchange Commission proposed a revamped rule Friday that would require companies to provide compensation details for top-paid nonexecutives who make “significant policy decisions.”
The proposal would for the first time require companies to disclose the pay of as many as three nonexecutive employees in addition to the compensation of five top managers. The plan, released on the SEC’s website, backtracks from a proposal by the regulator in January for companies to disclose the pay of employees such as television personalities, professional athletes and Wall Street traders, who don’t have management duties.
The SEC has opened a 45-day public comment period for the revised proposal, asking whether it balances investors’ needs for compensation information with the privacy concerns of nonexecutives. The agency also is seeking comment on whether it should require companies to describe the duties of the three top- paid nonexecutives and define the phrase “responsibility for significant policy decisions.”
“They’re trying to prevent companies from tucking their most significant policymakers out of the spotlight by not making them a corporate officer,” said Mark Borges, a former SEC attorney and principal in the Washington office of Mercer Human Resource Consulting.
Last month, the SEC adopted the first overhaul of executive pay rules in 14 years. In doing so, the agency shelved the measure on top nonexecutives after companies including Morgan Stanley, T. Rowe Price Group Inc. and DreamWorks Animation SKG Inc. complained that disclosing the salaries could stir jealousy among employees and help recruiters steal prized talent.
The revised SEC proposal satisfies concerns that disclosure of nonexecutives’ compensation will make it more difficult for companies to compete, said Patrick McGurn, vice president and director of corporate programs at Institutional Shareholder Services, a Bethesda, Md.-based firm that advises large investors. “They’ve cured the problem,” he said.
The proposal would apply to companies with a market value of $700 million or higher and cover disclosure of pay for nonexecutives over the previous year, the SEC said. It would allow companies to identify the three employees by job description, not name.
The SEC intends to give investors information about “people who wield a significant amount of influence in an organization, and that significance is represented by the amount they make,” Borges said.
Such employees may include the director of a news division of a major television network, a portfolio manager in charge of equity funds at a money management firm or the head of a technological innovation unit, the SEC said in the proposal.
“A salesperson, entertainment personality, actor, singer or professional athlete who is highly compensated but who does not have responsibility for significant policy decisions would not be the type of employee about whom we would seek disclosure,” the SEC said.