Human Capital & Careers

SEC Proposes Rule On Options

Will proxy statements have to include every last detail about employee stock option programs?
Michelle GabrielleFebruary 1, 2001

As more and more companies have adopted some sort of equity compensation, particularly in the form of stock options, concerns about their impact on the company have increased as well. As a result, companies may soon be required to disclose key information about employee stock options.

The Securities and Exchange Commission has proposed a rule that will require companies to include all option disclosures in a registrant’s proxy statement or annual report. Click here to read an outline of the rules.

Companies would be required to disclose the amount of securities authorized for issuance under each plan, the total number awarded, the number of shares to be issued upon the exercise of outstanding options, as well as any remaining shares available for future issuance under each plan.

For companies already in the habit of disclosing this information, the rule may have little effect. They may just have to do a little more paperwork to assure that their disclosure is in a more standard format and timely fashion.

On the other hand, companies that currently do not disclose this information regularly may encounter adverse shareholder reaction.

All in all, says Mark A. Borges, the SEC’s Counsel to Commissioner, Laura Unger, “the rules will make transparent exactly what is happening out there. Shareholders will have this information readily available to them.”

Public comment on the proposal can be submitted over the next 60 days.