In a December 16 meeting, the SEC finalized its rules on proxy disclosures about compensation and a range of other factors, including director qualifications and filing votes at annual meetings. The rules will be effective from February 28, 2010, just in time for the proxy rush next season.
While there are a bunch of changes, frankly, I remain unimpressed about the extent of change.
Quite a bit about the final rules has changed from the draft rules that came out on July 1 (I blogged about those here). Except, of course, one thing that did not change was the one piece of it that I actually wanted them to change.
I mean, I know no one reads my blogs – well no one with the first name of Lloyd – but this was a letter to Mary Schapiro and I know she, or someone at the SEC, must have read that. But, no, the summary compensation table is going to include the estimated grant date value of equity awards along with the actual salary, actual bonus, actual benefits, actual etc. So it will still be a nonsensical mixture of different kinds of compensation.
On the other hand, looking on the bright side, this means that the discerning pay analyst will still have to subscribe to Board Analyst to find out exactly what executives actually made during the year because sure enough the summary compensation table ain’t gonna tell them.
One good thing, though, the rules state that, for fiscal years ending on or after Dec. 20, 2009, companies will be required to present recomputed disclosure for all fiscal years included in the tables, so at least as far as that’s concerned we’ll have apples to apples.
While that bit didn’t change, companies will be required to assess if their compensation policies and practices for all employees, not just executive officers, create risks that are “reasonably likely to have a material adverse affect on a company.” How much real, meaningful information will come out of the exercise remains to be seen.
The SEC stepped back, though, on its requirements for the disclosure of compensation consultant fees. Instead of just getting it all out there, which would have been much simpler, thresholds and exclusions were adopted.
Well, hey, how can you keep on producing 137-page documents if you keep things simple?
Fees won’t have to be disclosed if the amount of additional services provided to the company by the consultant or an affiliate is less than $120,000 during the company’s fiscal year. The requirement also makes an exception for consulting on broad-based plans such as 401k)s or health insurance plans, and other services such as surveys… so that’s just about everything then.
Expect few disclosures in this area, therefore.
Paul Hodgson - Senior Research Associate
