The SEC’s “Frankenstein Patchwork” to disclose executive benefits is for transformation
In the days when Jeff Bezos and Mark Zuckerberg were common names, many C-suiters can be considered public figures. However, its status has a risk Murder of the UnitedHealthCare executive Brian Thompson explains.
Peter Chan, partner at law firm Baker McKenzie, told CFO Brew, “The ability for people to track CEO movements using public data available is much easier.” “The truth is, the CEO can’t take off his hat and say, ‘I’m a private citizen right now.’ ”
The growing public profiles of CEOs and other executives have heightened their desire for them. Their family– To have security. Even before Thompson’s murder, security spending for top executives at the company was on the rise. Median security costs for S&P 500 CEOs It rose 114% Between 2019 and 2023, Glass Lewis analysis shows.
However, the SEC considers security spending perks and requires that companies be disclosed as part of executive compensation for annual applications. Jennifer Broder, partner of Chang, who previously worked at the SEC, and his colleague Baker McKenzie, argue that it should change.
They also believe that the SEC should reconsider classifying executive individual travel as perks. When the SEC rules on perks received their final major extension in 2006, the line between “individual” and “business” travel was blurred, Broder told CFO Brew. Technology has advanced, and the board is hoping that C-Suiters will now be available around the clock, and she and Chan pointed out to frequently travel and work along the way to offices that may be scattered around the world. “But the SEC has a vast view of what is considered personal,” Broder said.
SEC Review Bonus: Changes may occur. June, SEC Hosted a round table Discussions with public company executives and other stakeholders reviewed executive compensation disclosure requirements and opened a public comment period on this topic.
SEC Chair Paul Atkins believes the area is ripe for an overhaul. He describes the current disclosure requirements as “Frankenstein patchwork of rules.” Load and confusion To obey.
Benefits are one area for reviews. During the round table, Commissioner Hester Pierce questioned whether a company was needed We will provide detailed disclosure Of the amount spent on executive perks, such as riding corporate jets, auto services, or overseas housing allowances. She said such disclosure seemed merely intended to be satisfying. Public curiosity And “not educate investors, but entertain spectators.”
Do investors get TMI? It is important that investors have information about perks, Glass Lewis’ report argues. A survey from the company found that “the majority of investors expressed concern that excessive difficulties could indicate wider pay concerns,” and found that directors should be liable for limiting excessive perks coverage.
However, there remains doubt as to whether items such as security and travel still count as perks and therefore should be considered part of executive compensation, or whether it would be more appropriate to classify them as business expenses. Chan argues that by making some perks part of the compensation, executive salaries can be artificially inflated. It could have “the unfortunate counterproductive effect of distorting information to investors,” he said.
Investors may not need the level of granularity regarding the perks the SEC requires, Chan said. If the board determines that executive travel or security is an appropriate operating expense, they will still be “disclosed in the sense that it is consolidated in the financial statements,” he said. He found it difficult to see why such information be itemized as “stand-alone and material for investors.”
This report was It was originally published by CFO Brew.