OLD Media Moves

Changing how proxy stories are written in the future

January 11, 2006

I envision a change in the basic way that executive compensation and proxy stories are written in the future if the proposed SEC rule mentioned in this morning’s USA Today makes its way into an actual regulation.

In short, the SEC is considering requiring companies to report a single compensation number for its executives.

Here is the top to the USA Today story:

“Responding to a wave of outrage over the pay packages of some CEOs, federal regulators will propose a rule next week that would force public companies to disclose, in a single number, the total compensation of each of their top executives.

“In a meeting with journalists Tuesday, Securities and Exchange Commission Chairman Christopher Cox explained that the proposal, to be voted on next Tuesday, would bring the SEC rules on compensation disclosure up to date with changes in the way the marketplace rewards senior managers.”

Each year, during proxy season, which is almost upon us, I field questions from business reporters about how they should report an executive’s compensation while deciphering a proxy statement. And I have discovered that each media outlet covers this differntly. Some papers focus on just the salary and bonus of the CEO, while others add the value of stock options, long-term incentive plan payments and the nebulous “all other compensation” to get a more complete figure.

But that figure is not always the total compensation package for a CEO. It sounds as if the SEC is trying to give investors a clearer picture of what that number is.

The Washington Post’s story noted that companies have come up with ways to make it hard to determine how much an executive is being paid compared to the previous year and have come up with ways to compensate in forms that aren’t included on the standard chart on the proxy statement: “Companies will also be required to make better disclosures of the cost of retirement plans, severance packages and deferred compensation plans, all of which have become a larger portion of executive pay and are not disclosed in the standard “executive compensation table” in shareholder proxy statements.”

With these changes, once they are passed, proxy statements will become easier to report about. And coverage will be more uniform. I have seen stories where one publication or wire service reports a compensation figure for a CEO, and then another media outlet report a totally different number, simply because there is no uniformity in how the compensation is measured.

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