Semi-Daily Journal Archive

The Blogspot archive of the weblog of J. Bradford DeLong, Professor of Economics and Chair of the PEIS major at U.C. Berkeley, a Research Associate of the National Bureau of Economic Research, and former Deputy Assistant Secretary of the U.S. Treasury.

Tuesday, January 10, 2006

Christopher Cox does good as head of the SEC:

WSJ.com - SEC to Propose Overhaul of Rules On Executive Pay : By KARA SCANNELL: The Securities and Exchange Commission, responding to rising criticism of soaring -- and partially hidden -- executive pay, is poised to propose the most sweeping overhaul of pay disclosure rules in 14 years, seeking to push companies to divulge much more about their top executives' perquisites, retirement benefits and total compensation. The proposed changes, according to SEC officials, would for the first time require corporate proxy statements to provide a column with a total annual compensation figure for each of a company's five highest-paid executives and be far more specific about the value of their various benefits. Total compensation is an elusive number under the current system, and one for which investor advocates have long sought greater disclosure.

In addition, the SEC would force companies to take the monetary value of the stock-option grants given to top executives and place those figures side-by-side with salary and bonus information. Under a new accounting rule, companies must start expensing the value of their stock options. These and other proposed changes will be presented at a public SEC meeting on Jan. 17, where commissioners will question staff members and vote whether to proceed with the plan. If approved, the proposed overhaul will be subject to a period of public comment, followed by a final SEC vote....

Mr. Cox has worked hard to make the commission -- composed of three Republican and two Democratic commissioners -- more harmonious by trying to get consensus on major issues. Just last week, he won unanimous backing for new guidelines on how much to fine a company that has engaged in financial fraud.... Mr. Cox said that a lot had changed since the SEC last addressed the issue in 1992. "The prevalent forms of compensation have migrated away from what is transparent to what is opaque," he said. "The market is capable of disciplining excessive compensation, provided that the market has adequate information. Too often in recent days, however, shareholders have been surprised to learn after the fact what their executives are being paid."

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