Risk & Compliance

Disclosure Rule

Tabula Fuller
John P. Mello Jr.July 1, 2001

The Securities and Exchange Commission wants companies to present their stock option compensation plans in neat, easy-to-read tables, rather than relegate the information to a footnote. To that end, the commission released a proposed rule calling for the tabular disclosures to be included in proxy statements, when companies submit a plan for approval by shareholders, or in 10Ks in years when companies aren’t seeking shareholder approval. The SEC says the proposed rule addresses the commission’s concerns about the absence of full disclosure to stockholders regarding the plans, the potential diluting effects of the plans on shareholder value, and the adoption of the plans without shareholder approval.

But opponents of the proposal, including Microsoft Corp., raise several objections. Chief among them is that the rule duplicates reporting requirements imposed by the Financial Accounting Standards Board and contradicts the SEC’s own efforts to streamline reporting.

Other firms are more sanguine about the idea. “The SEC is proposing modest additional disclosures, and that’s not a problem for us,” says Cary Klafter, director of corporate affairs for Intel Corp., in San Jose, Calif. However, he adds, the proposal should allow companies to aggregate, or exclude, information on select plans. “Some companies have a large number of stock option plans that they’ve inherited from mergers,” he explains. “If we had to disclose all the data for each of those plans, we’d have a large block of information that really wouldn’t be very meaningful to the reader.”

Still, the idea has garnered some support. “While most of the information that would go into the table is already available in one form or another,” observes Brian Borders, president of the Washington, D.C.-based Association of Publicly Traded Companies, “the idea of making it available in a tabular form is a good one.” — John P. Mello Jr.


The SEC wants 10Ks to clearly display the number of securities:

  • authorized by the board
  • issued upon the exercise of options
  • remaining available for future issuance