Jenner & Block

MCCA Expo: Wolff Discusses the SEC's Revised Executive Compensation Disclosure Rules

The SEC’s new and expanded executive compensation disclosure rules was the focus of a panel discussion at the Minority Corporate Counsel Association 7th annual CLE Expo, held March 27 in Chicago.

Jenner & Block Partner Elaine Wolff, a former Legal Branch Chief for the SEC's Division of Corporate Finance, served as a panelist at the session, which explored how public companies should approach their second year under the new rules. In addition to Ms. Wolff, the panelists included Katherine K. Combs, Senior Vice President - Corporate Governance, Corporate Secretary and Deputy General Counsel, Exelon Corporation, Althea R. Day, Partner, Morgan, Lewis & Bockius LLP, and  Patrick S. McGurn, Special Counsel, RiskMetrics Group Inc.

Now that there has been a chance to review the first year of public company disclosures under the new rules, "the SEC wants companies to do better on the analysis side of their Compensation Discussion and Analysis (CD&A) and the manner of presentation of their disclosure," said Ms. Wolff at the session. "It is not so much as how, but why such compensation is paid."

The panel offered practical tips for dealing with issues related to the creation of a CD&A, a management report of compensation objectives and policies for named executive officers.  For example, the panelists said that a current compensation disclosure hot topic is performance targets.  Ms. Wolff provided advise on how to make a successful argument that such targets are confidential commercial or financial information the disclosure of which would cause competitive harm.

In addition the panel offered CD&A preparation advice for providing sufficient explanations of base salary determination and policies, performance targets, current year targets, the use of discretion to increase or decrease awards, the use of comparator groups to benchmark compensation and the use of compensation consultants.

The panel also offered "best practice" tips for creating successful CD&A's, which, amongst other suggestions, included a greater use of graphics, charts and presentations to present data, using an executive summary that can serve as a road map, and highlighting the biggest discrepancies in order to provide an explanation for each one.