SEC adopts new executive benefit disclosure policy, widens options backdating probe
The SEC unanimously adopted a new set of regulations on Wednesday that will substantially overhaul its executive benefit disclosure policy. The new regulations, which are scheduled to take effect next year, will require companies to provide additional details of executive pay and perks. For the first time, public companies will be required to furnish tables in annual filings showing the total yearly compensation for their chief executive officers, chief financial officers, and the next three highest-paid executives. The SEC's new regulations are designed to force companies to disclose the true costs to companies' bottom line of their executives' pay packages, including stock options, in plain and understandable terms.
The SEC's regulations will also include new requirements for companies regarding the disclosure of options timing. This move coincides with the SEC's widening investigation over suspect timing of stock option grants to company executives. In expanding probes, the SEC now says it has at least 80 companies under scrutiny, with backdating the central issue in many of the investigations.
Just last week, criminal and civil complaints were filed against the former CEO and HR manager of Brocade Communications Systems. SEC Chairman Christopher Cox trumpeted the first charges in the SEC's options probe, saying, "In many cases it (backdating) makes a hash of a company's financial statements. It's poisonous."
