Freshly baked from the SEC…

A short time ago, the SEC released its much-anticipated review of the 2007 proxy season and the new rules on executive compensation. The short version is that too many companies — well, at least the 350 that the SEC reviewed — wrote way too much, but said way too little about compensation and that there needs to be a better way at presenting the information so that ordinary people don’t have to read 32 footnotes in 6-point type to find out how much a CEO is getting paid.

As the WSJ reported just before Labor Day, the SEC has been busy sending out comment letters to companies about compensation. So far, those comment letters have not been made publicly available, so all we really have is the summary report, which notes that a substantial/significant (it’s hard to say whether one is larger than the other in the SEC’s mind) number of companies failed on various fronts.

Reading today’s report shows that the SEC had particular problems with the CD&A’s — the new section that was supposed to provide “material information about the compensation objectives and policies”. Here’s a snippet from the SEC’s report:

For example, we asked a significant number of companies to replace boilerplate discussions of individual performance with more specific analysis of how the compensation committee considered and used individual performance to determine executive compensation. Where a company repeated information from the required compensation tables, we asked it to replace that disclosure with a clear and concise analysis of the information in the required compensation tables or to relocate the discussion to the narrative following the appropriate tables or the footnotes to those tables. Where a company’s disclosure appeared identical to language in a compensation plan or employment agreement, we asked it to present the information in a clear and understandable manner.

Specific performance targets, which in many proxy statements sounded like a bunch of fancy words strung together, were also harshly criticized. More than a few companies opted out, citing the potential for competitive harm, which the SEC also didn’t take too lightly.

Of course, what’s missing from today’s report are any names, which is what we all want to know, right? Which companies tried to peddle the “competitive harm” line and which ones tried to flood the zone by writing too much, but saying too little? For that, we’ll have to wait for the actual comment letters, which should make for some interesting reading.


Some of you may have noticed that as part of the redesigned site, I’ve introduced tags, which is blog-speak for grouping posts around common content, like today’s post, which focuses on the SEC, CD&As and comment letters. These tags appear in the sidebar and are different from the category posts in the pull-down menu. This is still very much a work in progress, so please be patient. Ditto for the “recent comments” section, which last week appeared in the sidebar as an actual comment, instead of as a link. It will be back in that format — just trying to work out a few kinks.