http://www.businessweek.com/magazine/content/10_10/b4169080706857.htm

CEO Pay and the SEC: The Power of Shame

New SEC Chair Schapiro seems willing to subject CEOs to good old-fashioned public humiliation—an encouraging development

By Patrick McGurn

Many people can recite the first half of Louis D. Brandeis' quote about
the cleansing qualities of disclosure—"Sunlight is said to be the best
of disinfectants...." Few bother with the rest of the sentence, in
which Brandeis calls "electric light the most efficient policeman." To
her credit, Securities & Exchange Commission Chairman Mary Schapiro
seems to have both sides committed to memory.

One of the priorities of any SEC chair is to address investor and
market concerns before populist anger spurs overreactions on Capitol
Hill (think Sarbanes-Oxley). Following the Wall Street bonus binge of
'09, Main Street anger over CEO pay is at an all-time high, and before
things get too out of hand, Schapiro has put compensation under the
lamp.

She and her deputies have used recent appearances at legal
conferences to spell out their expectations for full compliance with
executive pay disclosure rules. And there's growing anticipation that
the SEC will make an example of an uncooperative company or two this
proxy season. Schapiro, it should be noted, has a newfound perspective
on the power of public exposure: Her former employer, the Financial
Industry Regulatory Authority, failed to fully disclose her rich payout
of $7.3 million, which some in the blogosphere have derided as being
downright Dick Grasso-esque.

Tougher standards were adopted in July 2006 by then-SEC Chairman
Christopher Cox, but his lieutenants failed to hold most issuers' feet
to the fire on linchpin disclosures related to performance targets and
benchmarking. As a result, corporate lawyers began to treat the cops at
SEC's Corporation Finance Div. with the kind of respect reserved for
Barney Fife—except that given the SEC's limited resources and Cox's
failure to provide adequate backup, Corp Fin lacked even the single
bullet Sheriff Andy Taylor allowed Barney to carry in his shirt pocket.

The ground started to shift last June when Schapiro proposed
post-meltdown pay disclosure changes to focus "further sunshine on
compensation decisions." These rules, which call for more information
about possible links between pay practices and excessive risk-taking
and breakouts of revenues received by "independent" advisers to board
pay panels, were adopted in December.

With Schapiro watching their backs, SEC staffers started acting a
lot more like Dirty Harry, uttering "make my day" warnings to issuers
and their advisers. In a Nov. 9 speech, Corp Fin Deputy Director
Shelley Parratt reset the bar for 2010. "Our expectations for quality
disclosure are heightened," Parratt said. "We expect companies and
their advisers to understand our rules and apply them thoroughly."
Overnight, scores of l