Mike
Well-known member
01/17/2006 09:20:23 AM EST
Houston Chronicle (KRT)
Jan. 17--When members of the Securities and Exchange Commission meet this week to discuss new rules for disclosing executive pay, they might want to have a chicken dinner catered.
Specifically, Tyson chicken.
Last year, Tyson Foods and its former chairman, Don Tyson, agreed to pay $2.2 million to settle SEC claims that the company made misleading disclosures about Don Tyson's compensation.
The SEC said a big part of Don Tyson's compensation came in perks and benefits -- including fancy rugs, vacations and housekeeping services -- that either weren't disclosed or were labeled as other expenses such as travel costs or performance bonuses.
Neither Tyson the company nor the man admitted or denied wrongdoing.
The case, though, is a reminder of the holes in the rules for disclosing executive pay. They haven't been updated in more than a dozen years, and too often they're easily dodged.
This week, the SEC, under new chairman Christopher Cox, will take the first steps toward tightening those disclosure rules when it discusses a plan to make executive compensation more transparent.
If approved, investors would get a better idea of how much their executives are costing them.
These days, the price is higher than ever. According to a study released last year by the Corporate Library, a shareholder research group, the average pay for chief executives rose more than 30 percent, to $6 million, in 2004, compared with a 15 percent rise in 2003.
Those figures, though, look solely at monetary compensation -- primarily salary and bonuses.
Total compensation for top executives is now more than 400 times that of average production workers, up from 107 times in 1990, according to a report by the Institute for Policy Studies cited by the Economist.
Even those numbers, though, may downplay the explosion in executive compensation, because they don't include all the other goodies executives squirrel away at shareholder expense.
That's where the SEC's new plan comes in. It would require companies to give more information about executive perks, severance and retirement packages, and include it all in a grand total for each of a company's five top executives, according to details of the proposal reported in the Wall Street Journal this month.
That would include the value of benefits such as stock options, which currently are listed separately in proxy statements but not included in the main compensation calculations.
It also would include the corporate jets, the designer floor coverings, the shower curtains and the birthday parties for spouses.
The benefits for shareholders are twofold. When changes in accounting rules forced companies to report stock options as a compensation expense, companies stopped handing them out to executives like jelly beans.
When companies are forced to reveal how much the country club memberships and ski chalets add to the cost of executives, some of the more egregious perks may disappear, too.
More importantly, though, better disclosure means shareholders get a clearer picture of executive cost relative to company performance.
In a discussion with reporters in Washington this month, Cox said some critics question whether such information will actually cause executive pay to rise. One executive might try to top another.
"But that's just not how markets work. Markets function best when there is more disclosure," he said, according to the New York Times.
The plan could still be derailed. If commissioners vote to move forward this week, there will be a public comment period, followed by a final SEC vote. Even so, approval would likely come in time to affect next year's proxy filings.
The big question will be how shareholders and companies respond to the new rules. Better disclosure won't mean much if investors don't use the information to demand change.
Some companies are changing already. Coca-Cola, under fire for its executive payouts in recent years, agreed last month to get shareholder approval for executive severance packages. In the past, Coke fought the idea, which won support from 41 percent of its shareholders at the last annual meeting.
It's worth noting that Tyson, too, has made a lot of progress on the corporate governance front since the days when, according to the SEC, the company bought Don Tyson antiques and an $8,000 horse.
Tyson's board cut the pay of its chief executive, John Tyson, Don's son, by 44 percent last year because of a 12 percent decline in the company's profit.
The company's past practices, though, still serve as an example of why the SEC needs to add more selections to investors' menu of information.
Houston Chronicle (KRT)
Jan. 17--When members of the Securities and Exchange Commission meet this week to discuss new rules for disclosing executive pay, they might want to have a chicken dinner catered.
Specifically, Tyson chicken.
Last year, Tyson Foods and its former chairman, Don Tyson, agreed to pay $2.2 million to settle SEC claims that the company made misleading disclosures about Don Tyson's compensation.
The SEC said a big part of Don Tyson's compensation came in perks and benefits -- including fancy rugs, vacations and housekeeping services -- that either weren't disclosed or were labeled as other expenses such as travel costs or performance bonuses.
Neither Tyson the company nor the man admitted or denied wrongdoing.
The case, though, is a reminder of the holes in the rules for disclosing executive pay. They haven't been updated in more than a dozen years, and too often they're easily dodged.
This week, the SEC, under new chairman Christopher Cox, will take the first steps toward tightening those disclosure rules when it discusses a plan to make executive compensation more transparent.
If approved, investors would get a better idea of how much their executives are costing them.
These days, the price is higher than ever. According to a study released last year by the Corporate Library, a shareholder research group, the average pay for chief executives rose more than 30 percent, to $6 million, in 2004, compared with a 15 percent rise in 2003.
Those figures, though, look solely at monetary compensation -- primarily salary and bonuses.
Total compensation for top executives is now more than 400 times that of average production workers, up from 107 times in 1990, according to a report by the Institute for Policy Studies cited by the Economist.
Even those numbers, though, may downplay the explosion in executive compensation, because they don't include all the other goodies executives squirrel away at shareholder expense.
That's where the SEC's new plan comes in. It would require companies to give more information about executive perks, severance and retirement packages, and include it all in a grand total for each of a company's five top executives, according to details of the proposal reported in the Wall Street Journal this month.
That would include the value of benefits such as stock options, which currently are listed separately in proxy statements but not included in the main compensation calculations.
It also would include the corporate jets, the designer floor coverings, the shower curtains and the birthday parties for spouses.
The benefits for shareholders are twofold. When changes in accounting rules forced companies to report stock options as a compensation expense, companies stopped handing them out to executives like jelly beans.
When companies are forced to reveal how much the country club memberships and ski chalets add to the cost of executives, some of the more egregious perks may disappear, too.
More importantly, though, better disclosure means shareholders get a clearer picture of executive cost relative to company performance.
In a discussion with reporters in Washington this month, Cox said some critics question whether such information will actually cause executive pay to rise. One executive might try to top another.
"But that's just not how markets work. Markets function best when there is more disclosure," he said, according to the New York Times.
The plan could still be derailed. If commissioners vote to move forward this week, there will be a public comment period, followed by a final SEC vote. Even so, approval would likely come in time to affect next year's proxy filings.
The big question will be how shareholders and companies respond to the new rules. Better disclosure won't mean much if investors don't use the information to demand change.
Some companies are changing already. Coca-Cola, under fire for its executive payouts in recent years, agreed last month to get shareholder approval for executive severance packages. In the past, Coke fought the idea, which won support from 41 percent of its shareholders at the last annual meeting.
It's worth noting that Tyson, too, has made a lot of progress on the corporate governance front since the days when, according to the SEC, the company bought Don Tyson antiques and an $8,000 horse.
Tyson's board cut the pay of its chief executive, John Tyson, Don's son, by 44 percent last year because of a 12 percent decline in the company's profit.
The company's past practices, though, still serve as an example of why the SEC needs to add more selections to investors' menu of information.
