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Dow Jones Newswires, March 29, 2007 article


The Wall Street Journal  

March 29, 2007 7:31 a.m. EDT


Companies Continue To Keep Executive Bonus Targets Under Wraps

March 29, 2007 7:31 a.m.

   By Kaja Whitehouse 

(This article was originally published Wednesday)


NEW YORK (Dow Jones)--Despite some pressure from the Securities and Exchange Commission, many companies continue to keep the financial targets used to determine executive bonuses under wraps.

Almost half of the 100 companies studied, or 46%, didn't disclose the targets that triggered annual bonus payments to executives last year, such as earnings per share of $2. Slightly fewer, or 45%, also failed to shed light on the targets tied to their long-term incentive plans, according to consulting firm Watson Wyatt Worldwide Inc. (WW), which conducted the study.

While almost half of companies didn't disclose the specific financial targets, they all disclosed the general financial metrics used in their executive compensation plans, such as EPS or net income, the study said.

How companies decide to dole out bonuses has been a hot topic as shareholders push for better insight into the links between executive pay and performance. Companies regularly stop short of spelling out how these plans work, leaving out financial targets and other figures shareholders would need to fully assess these awards.

Watson Wyatt looked at bonus disclosures of the first 100 companies in the S&P 500 index that complied with the SEC's new compensation disclosure rules, effective this year. The new rules overhaul how companies explain their executive pay practices, which are revealed in companies' annual proxy statements.

Without the financial targets, it's unlikely that shareholders will be able to make an "informed external opinion" about these plans, Ira Kay, executive compensation consultant with Watson Wyatt, told Dow Jones Newswires.

Last year, shareholders pressured the SEC to require companies to be more forthcoming about their pay for performance plans. The SEC has long allowed companies to hold back on details that might be considered confidential business information, such as whether bonuses are contingent on a certain sales or revenue numbers.

Some large shareholders suggested that the SEC require companies to disclose the bonus targets after the performance period had ended.

The SEC ultimately kept its rules the same, but warned companies that it would be reviewing their bonus disclosures to ensure that they weren't hiding behind the confidentiality rule.

Companies "really agonized over this issue" as they prepared their compensation disclosures, said Kay. "They are struggling to balance the competitive issue with the transparency that the shareholders and the SEC are desiring," he said.

By Kaja Whitehouse, Dow Jones Newswires; 201-938-2243;

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