SEC Proposes New Rules for Executive Compensation Disclosure

At its open meeting yesterday, January 17, 2006, the Securities and Exchange Commission approved for comment sweeping new rule proposals that would dramatically alter many public company disclosure practices. The proposed rules would affect disclosure in proxy statements, annual reports and registration statements, and require disclosure in plain English. Most of the proposals are in the area of executive and director compensation disclosure mandates. In addition, the proposals would amend disclosure requirements about related party transactions, director independence, corporate governance, and security ownership of officers and directors. The proposed rules would also modify current Form 8-K reporting requirements for employment arrangements. All five commissioners expressed their support for this effort to improve compensation disclosure, which was last overhauled 14 years ago, and welcomed comments on the proposals.