Amid a widening scandal over suspect timing of stock option grants to company officials, the Securities and Exchange Commission also is writing new rules on disclosure of the dating of options. The five SEC commissioners voted unanimously at a public meeting to adopt the plan, which will take effect on Dec. 15 so companies’ 2006 annual reports issued early next year will reflect the changes.
For the first time, public companies will be required to furnish tables in annual filings showing the total yearly compensation for their chief executive officers, chief financial officers and the next three highest-paid executives.
Most of the disclosures, in annual reports and other regulatory filings, will have to be written in plain English.
The plan is designed to enhance corporate accountability and address an issue that has angered shareholders and the public.
”More information helps make the markets work,” said Steve Odland, chairman and chief executive of Office Depot Inc. and an official of the Business Roundtable, a group representing CEOs of major companies. The new rules ”will give important information to shareholders who are making investment decisions and … will help [company] boards evaluate and determine executive compensation.”
In the controversy over timing of options awards to executives, at least 60 public companies have disclosed that their options practices are being investigated by the SEC or the Justice Department or both, and the SEC itself says it has at least 80 companies under scrutiny.