SEC Review of Executive Compensation Disclosures

In 2006, the Securities and Exchange Commission (SEC) adopted broad reforms to the disclosure rules regarding executive compensation. The new rules resulted in significant changes in the manner in which public companies prepared and presented executive compensation disclosure information in their proxies and 10-Ks. Among other things, the new rules increased the number of tables and level of quantitative detail that must be included in compensation disclosure, and also created a significant new area of largely qualitative disclosure regarding executive compensation, known as the Compensation Discussion and Analysis, or CD&A. The new requirements became effective for most companies beginning in the 2007 proxy season concluded in the spring of this year.

While many companies spent a great deal of time and effort in working to comply with the novel and complex rules, and in particular in drafting the CD&A, reactions to the overall quality of the new disclosure have been mixed, with general comments and criticisms coming from the business media, shareholder and corporate groups, and members of the SEC staff.

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