UPDATE 1-Bailout bill sets pay
disclosure challenges-US SEC
Tue Oct 21, 2008
By Karey Wutkowski
WASHINGTON, Oct 21 (Reuters) - The
executive compensation restrictions mandated by the U.S. $700 billion market
rescue plan "will introduce new compensation disclosure challenges," an
official at the U.S. Securities and Exchange Commission said on Tuesday.
John White, director of the SEC's
corporation finance division, said companies participating in the capital
infusion plan or asset purchase programs will "need to carefully consider
and reflect the new provisions and their ramifications" in their regulatory
He said that even companies not
participating in the programs will also likely need to make significant
changes to their disclosures to reflect how their pay programs have been
changed because of the financial market turmoil.
In the bailout bill passed earlier this
month, lawmakers restricted participating companies from giving their
departing executives so-called "golden parachutes" and capped the tax
deduction to $500,000 of pay for each senior executive.
White, speaking at a conference in New
Orleans, also said the SEC's corporation finance division plans next year to
conduct a special review of the largest financial firms' annual reports.
The SEC's selective review program is
mandated by Sarbanes-Oxley reform legislation. It requires that the SEC
review all public companies on a regular basis, but no less frequently than
once every three years.
White said the review will include the nine
large U.S. banks that have already signed on to receive a total of $125
billion under the U.S. Treasury Department's capital infusion program.
"Our reviews will include both the
financial statements and the executive compensation disclosures of these
companies," White said.
But he said the new pay requirements placed
on participating firms could bleed into other companies. He noted that the
bailout bill limits compensation arrangements that could lead executives to
take excessive risks -- an idea likely being incorporated by other
companies, White said.
"I expect that current market events are
already affecting many companies' compensation decisions and thus should be
affecting the drafting of their upcoming (disclosures)," he said.
(Reporting by Karey Wutkowski and Rachelle
Younglai; Editing by Andrea Ricci and Gerald E. McCormick)
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