SEC Approves Proxy Changes

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Published in Human Resource Executive, December 9, 2009 by Anne Freedman
Final rules adopted by the U.S. Securities and Exchange Commission will require HR leaders to work with other company executives to determine whether their organizations’ compensation programs incentivize risky behavior.
Companies have always had to disclose “issues of risk as it relates to discussion of executive officers,” says Charles Tharp, executive vice president for policy of the Center on Executive Compensation in Washington.
The new rules — which require disclosure of compensation that is “reasonably likely to have a material adverse effect” on the company — now encompass employees below the named executive officers who are normally included in the proxy statement, he says.
If there is no such material adverse effect, then disclosure is not required.
The final rule — which was adopted Dec. 16 and goes into effect Feb. 28, 2010 — offers a slightly lower standard than the preliminary proposal issued in July, which required disclosure of compensation that “may have a material effect” on the company.
Scott Olsen, principal in PricewaterhouseCoopers HR Services Practice in New York, says that, regardless of whether disclosure is ultimately required in the proxy, HR leaders will need to create processes to analyze the risk involved in their organizations’ compensation programs.

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