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Wall Street Journal, June 3, 2009 article

 

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MANAGEMENT  |   JUNE 3, 2009

SEC Ready to Require More Pay Disclosures


By KARA SCANNELL

The Securities and Exchange Commission plans to propose that companies disclose in general terms how they compensate lower-ranking employees, expanding disclosures for the first time beyond the executive suite.

The proposal is part of a review of executive-pay policies at the SEC and other agencies addressing practices that many believe led financial companies to take on too much risk. The SEC also may require companies to explain their ties to compensation consultants who often negotiate lavish pay packages for top executives.

[Mary Schapiro]  

Mary Schapiro

SEC Chairman Mary Schapiro said Tuesday during congressional testimony that the rules could be taken up by the agency next month. They would then go through a public-comment period and require final approval by the agency.

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.

In 2006, the SEC sought to require companies to disclose the compensation of highly paid nonexecutives. Industries successfully pushed back, saying that information was akin to a trade secret and disclosing it could allow rivals to steal employees.

The SEC is also expected to seek information about the overall design of the company's pay structure and how compensation relates to an employee's performance over the long run.

Write to Kara Scannell at kara.scannell@wsj.com

Printed in The Wall Street Journal, page C1

 

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