Checking on Risky Pay

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Published in CFO December 18, 2009 by. Alix Stuart

If a compensation policy could be harmful to a company’s health, the Securities and Exchange Commission wants investors to know about it.
This week the regulator approved a laundry list of new disclosure rules that will apply to virtually all proxy statements issued next year. The centerpiece of the new rules is a mandate that companies explain the risks that their compensation practices pose if they are “reasonably likely to have a material adverse effect on the company.”
A carryover from the requirements originally imposed on recipients of the Troubled Asset Relief Program, the rule says companies must consider compensation risk for all employees, not just executive officers. “Accountability is impossible without transparency,” said SEC Chairman Mary L. Schapiro in a press release accompanying the decision.

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