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 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
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
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
Printed in The
Wall Street Journal, page C1