The Advisors' Blog

As I blogged a few days ago on TheCorporateCounsel.net, SEC Chair White gave a huge speech this week about her desire to overhaul the disclosure regime to reduce information overhaul and provide more meaningful disclosures to investors. Here is an excerpt that deals with executive pay disclosures:

We see a similar phenomenon in the area of executive compensation disclosure – where the disclosures in some cases can amount to more than 40 detailed pages. The rules for such disclosure have been revised, perhaps, more times than any other set of disclosure rules as we have tried to keep pace with changing trends in compensation.

Part of this increase is not from new disclosure mandates, but from companies trying to do a better job of explaining the rationale for the compensation packages they pay executives because they now must provide investors with an advisory vote on executive compensation – a “say-on-pay” vote. The Dodd-Frank Act mandated such a vote, which most companies are providing annually. And, as a result, companies have decided to more fully explain to their shareholders the rationale and considerations for these compensation decisions. And we think these additional disclosures are a good thing, but we should be careful not to have too much of a good thing.

Does this mean that Item 402 of Regulation S-K will be revisited? The answer is “we don’t really know, but that a broad disclosure reform project – particularly one that would change the way information is delivered (eg. framework with “core” company document that is supplemented) would likely change all of S-K.”

The scope of this project looks to be humongous. But history shows that those types of projects tend to not get far off the ground (egs. Aircraft Carrier; proxy plumbing) – so maybe the SEC will learn from past experience and try to conduct disclosure reform in a piecemeal fashion. Of course, there are drawbacks to that approach too as the agency would want all the pieces to fit together, which is more easily accomplished in one stroke. Plus I imagine there would be a goal to finish the project within the span of SEC Chair White’s (and the Staffers doing the real work) tenure at the SEC.

It will be interesting to see where this goes, with the first step being the SEC’s Regulation S-K study required by the JOBS Act, which should be coming out pretty soon…