U.S.
securities regulators are considering changing how companies are
required to disclose stock options awarded to executives, people
familiar with the Securities and Exchange Commission's thinking told
Reuters on Tuesday.
At
an SEC meeting on Wednesday, the commissioners also will propose giving
investors a greater voice in setting executive pay at companies that
were given taxpayer funds under the U.S. government's Troubled Asset
Relief Program.
Among
the possible changes is a revision to how companies value equity awards
in the "summary compensation table" for top executives that they file
with the commission each year.
The
SEC is considering requiring companies to include the estimated value
for stock options granted during the year, the people said. The sources
requested anonymity because the proposal is still being crafted and may
change.
The
table now includes the value of option grants that vested, or became
eligible to be exercised, during the year. Many compensation experts
consider this an imperfect way to value options, and believe options
should be valued as of the date they are granted.
A change in how companies report the value of stock options could profoundly affect the reporting of executive pay.
Citigroup Inc (C.N),
for example, reported $10.8 million of compensation for Chief Executive
Vikram Pandit in 2008, according to a proxy filing. Had the bank valued
Pandit's stock and option grants as of the date they were granted, his
reported compensation would have been $38.2 million.
Pandit
was awarded much of his 2008 compensation on Jan. 22 of that year, when
Citigroup shares closed at $24.42. The stock closed Tuesday at $2.97,
and Pandit's awards are now either under water or show paper losses.
OBAMA PUSHES CHANGE
The
Obama administration has sought to rein in excessive executive pay amid
outrage from lawmakers and the public that some executives, including
some at insurer American International Group Inc (AIG.N), were copping big pay packages even as the government propped up their companies.
administration has urged Congress to give the SEC authority to require
publicly traded companies to give shareholders a nonbinding vote on pay
for top executives.
It also wants the SEC to have power to insure that corporate pay committees are sufficiently independent from management.
The
SEC may propose requiring companies to disclose more information about
compensation consultants who also perform other work for the company,
the sources said.
For
example, if a consultant provided compensation advice and other
services, the company would be required to disclose their fees and the
other work being performed.
Governance
activists charge that consulting firms face conflicts of interest
because of their dual role in advising companies on human resources as
well as executive pay.
OTHER CHANGES
The
SEC may also expand the so-called compensation, discussion and analysis
(CD&A) section of the proxy statement, to require companies to
address how they set compensation for regular employees, as well as top
executives.
The
regulator also is mulling further disclosures about the experience and
qualification of director candidates, as well as why a company adopts a
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