SEC Unhappy with Answers on Executive Pay

NEW YORK -- The Securities and Exchange Commission sent letters to 350 companies last summer and fall critiquing the way they described the pay of their top executives. But the federal watchdog isn't happy with most of the answers it got, The Wall Street Journal reported Tuesday.

A majority of the companies have now received second letters, according to an SEC official, and of 26 companies whose cases were closed, 21 were chided for not giving enough information about the role of individual performance in their pay decisions, the paper reported.

The increasing SEC scrutiny could spur changes in how companies calculate compensation, including moving away from individual performance as a measure of success -- one of the areas the SEC focused on as particularly weak -- in favor of companywide financial targets, such as earnings or stock prices, the paper reported.

Another possible result is that companies will stuff even more information into company proxy statements, which are already larded with charts and footnotes. That could mean an additional table with top officers' individual goals and how their pay stacks up against colleagues' rewards, the paper reported.

Letters from the 26 completed cases were recently made public on the SEC's Web site. The others will be posted 45 days after the SEC considers itself satisfied, the paper reported.

-- NYSSCPA.org News Staff

Posted on 1/29/08