Any proxy solicited in connection with an annual meeting would need to include a separate advisory vote on executive compensation, as disclosed in the compensation committee report, compensation discussion and analysis, compensation tables and related proxy disclosures currently required by the SEC.
In the proxy report's compensation discussion and analysis, the SEC wants companies to look at whether compensation policies create incentives for employees that could add to risks.
After the first disclosure in 2007, the SEC identified some areas of concern, such as the lack of analysis in the compensation discussion and analysis (CD&A), and recommended changes so that shareholders will have better information when comparing among peer companies.
Cox said the SEC would require companies to include in their financial statements a Compensation Discussion and Analysis section that lays out the rationale behind executive pay decisions.
According to a review of Compensation Discussion and Analysis (CD&A) reports at Fortune 500 companies, the prevalence of companies that considered accumulated wealth when determining executive pay levels increased from 8.
1 Proposed amendments to compensation disclosure include: Expanding disclosure in the Compensation Discussion and Analysis (CD&A) to address how overall compensation policies for employees (including employees who are not named executive officers) create risk incentives that can affect the company's risk and the management of that risk taking; Reporting the aggregate grant date fair value of stock and option awards of executives and directors, as opposed to the amount recognized for financial statement reporting purposes; and Additional disclosure regarding fees paid to (and services provided by) compensation consultants and their affiliates if they also provide other services to the company.
The existing compensation committee report and performance graph would be replaced with a Compensation Discussion and Analysis section that focuses on the key factors underlying compensation policies and decisions.
Hunter noted that the resolution is intended to complement newly enacted Securities and Exchange Commission Compensation Discussion and Analysis rules.
