SEC To Vote on Final Rule on Executive Compensation July 26

July 20, 2006

FEI Summary

On July 20, 2006, the U.S. Securities and Exchange Commission (SEC) posted a Sunshine Act notice announcing it will hold an open commission meeting on Wednesday, July 26 to consider adopting final rule(s) amending the disclosure requirements on Executive Compensation.   

Specifically, the commission will discuss final rules that would amend the disclosure requirements for executive and director compensation, related party transactions, director independence and other corporate governance matters, security ownership of officers and directors, and a requirement that these disclosures generally be provided in plain English.

In adopting the final rule(s), the commission will consider comments received on the related proposed rule issued in January.  The comment letter filed by FEI’s Committee on Corporate Finance (CCF) is available here.

In related news, an article appearing on page C1 of the July 20, 2006 Wall Street Journal, “SEC May Scrap ‘Couric’ Rule on Pay Disclosure,” available here, (subscription to WSJ-online required to view article) says that the SEC is expected to eliminate or significantly change the part of the earlier proposed rule that would have required companies to disclose not only the compensation of the top five executive officers, but also the pay of the top three “nonexecutive” officers,  if their pay exceeded that of the top five executive officers.  Referred to by some as the ‘Katie Couric’ clause, the WSJ noted that not only did businesses object to the clause on privacy/competitive grounds, but investor representatives such as Institutional Shareholder Services also objected. The comment letter filed by FEI’s CCF also recommended the SEC eliminate this provision.

Additionally, the Wall Street Journal article notes that the SEC is expected to consider disclosure provisions relating to granting of stock options, in part as a reaction to the current investigations of alleged stock options backdating and springloading.  

The July 26 SEC open commission meeting will be held at SEC’s headquarters in Washington DC and a live webcast will be available here.

Updated July 20, 2006 by Edith Orenstein (eorenstein@FinancialExecutives.org), Director, Technical Policy Analysis, Financial Executives International (FEI). This summary does not represent FEI opinion, unless specifically noted above.