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When it comes to change-of-control CEO pay package reporting to the Securities and Exchange Commission, does your company report with tables or in long-form, boilerplate paragraphs? This question was a key focus of investor advisory group RiskMetrics' 2008 Governance Conference in New York on Tuesday.
Broc Romanek, editor of CompensationStandards.com, a CEO pay package research firm, told investors he was disappointed that the Securities and Exchange Commission did not require corporations to detail in tables what the executive would earn in a change of control, post-termination or other succession situation in clear, easy-to-read tables. "When SEC changed rules last year, they didn't require tabular disclosure, and the disclosure they got in return is difficult to read in this subject," Romanek told institutional investors, brokers and investor relations officials at the conference. "This is the area that got the second most comment from observers, particularly people wanting to see the SEC require tables." The SEC in 2006 required a hodge-podge of new pay package disclosure rules, but it did not require corporations to provide details of change of control pay packages or other scenarios where CEOs would lose their employment. Roughly half of corporations, voluntarily, last year provided tabular disclosure of change-of-control pay packages. Patrick McGurn, director at ISS, said companies should provide eight different scenarios, in tables, for what pay is received when executives lose their employment, including when a company is acquired. He added that when companies did not provide these different scenarios in tabular form it raised a red flag for him. "I think there should be something to look for there," he said. "Absence of that detailed information has made companies the target of investors for not making that detailed and easy to read disclosure." Romanek added that when companies don't provide the table, it "increases shareholders level of skepticism that boards are in control of the executive compensation process." - Ron Orol See additional stories from the RiskMetrics 2008 Corporate Governance Conference Ron Orol is a Washington-based reporter for The Deal and author of Extreme Value Hedging: How Activist Hedge Fund Managers Are Taking on the World.Categories Deal Video
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