Within its proposed new rules on disclosure of executive compensation, the Securities and Exchange Commission has included a requirement that may address an issue which could have played a role in WorldCom’s bankruptcy.

The requirement would require a footnote disclosure of the number of shares pledged as collateral by executive officers, directors, and director nominees who receive a loan from the company. Specifically, the proposal refers to shares that “may be subject to material risk or contingencies that do not apply to other shares beneficially owned by these persons.”

“These circumstances have the potential to influence management’s performance and decisions,” continues the requirement, which is tucked nearly one-third of the way into the 370-page SEC proposal. “As a result, we believe that the existence of these securities pledges could be material to shareholders.”

In its own footnote, the commission referred to a 2004 report that states, “The extension of loans to the CEO of WorldCom, which were collateralized by WorldCom shares owned by the CEO, contributed to WorldCom’s financial demise.”

The Wall Street Journal observed that this proposal could generate a slew of complaints from executives who are subject to this disclosure. One compensation expert told the paper that he thinks executives will no longer make these kinds of pledges if the requirement is finalized in its current form.

“Most CEOs don’t want to disclose pledging of their stock on a personal investment because it’s an invasion of privacy, and it may make them look bad,” Mark Reilly, a partner at 3C, Compensation Consulting Consortium in Chicago, told the Journal. “A lot of executives and their advisers are going to have heartburn” about revealing so much personal information, he reportedly added.