Risk & Compliance

Cox Hints at Retreat from Pay Disclosure

The commission's final proposal may omit the requirement that companies disclose the identities of as many as three highly compensated nonexecutives.
Stephen TaubMay 30, 2006

The Securities and Exchange Commission may be backing off from part of its proposal that would revamp disclosure of executive compensation, according to the Los Angeles Times.

SEC chairman Christopher Cox told the newspaper that the commission’s final proposal may omit the requirement that companies disclose the identities of as many as three highly compensated nonexecutives.

Entertainment companies and sports franchises, in particular, have raised objection to the “Katie Couric” provision, which would apply if a nonexecutive earned more than any of the five most highly compensated company officers. Though only a job description and not a name would be disclosed, critics maintain that this would be more than enough to identify many of these star performers.

The rule would “invade the privacy of employees, reveal confidential and proprietary information to the company’s competitors…cause significant employee morale issues, and provide investors with information of limited value,” Jeffrey Katzenberg, chief executive officer of DreamWorks Animation SKG, wrote in a comment letter to the SEC, the Times reported.

“My forecast is either the proposal will be significantly scaled back or it will be removed altogether,” Cox told the paper. “If one takes the commentary seriously, as the commission must, we have to recognize the validity of these concerns.”

Keep in mind that the SEC proposal would also require companies to disclose the compensation of the top financial officer, whether or not that individual fell within the top five. Cox’s interview with the Times did not speak to that part of the proposal.

According to the newspaper, Cox hopes that the SEC will issue its final pay-disclosure rules by late summer.