Human Capital & Careers

SEC Tweaks Pay Disclosure Rules

New rules are designed to better match FASB's option accounting rules.
Stephen TaubDecember 26, 2006

The Securities and Exchange Commission has adopted new rules for how companies should disclose executive and director compensation.

The regulator said the rules should more closely conform with the reporting of stock and option awards under the Financial Accounting Standards Board’s Statement of Financial Accounting Standards No. 123.

FAS 123 requires recognition of the costs of equity awards over the period in which an employee is required to provide service in exchange for the award.

Using this same approach in the executive compensation disclosure will give investors a better idea of the compensation earned by an executive or director during a particular reporting period, the SEC explained in its announcement.

“The new disclosure requirements will be easier for companies to prepare and for investors to understand,” said SEC Chairman Christopher Cox, in a statement.

On July 26, the Commission adopted revisions to its executive compensation disclosure requirements for proxy statements, registration statements, and annual reports filed by public companies.

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