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September 11, 2006
Will New Rules Affect Executive Pay Levels?

Twenty-eight percent of HR and compensation executives say the Securities and Exchange Commission's new executive-pay-disclosure rules will decrease executive pay levels, but most say the new requirements will have no effect, according to a survey by Watson Wyatt Worldwide.

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Fifty-four percent of respondents said the new rules will have no effect on executive pay levels.  Three percent think that the rules will lead to higher pay levels, and the remaining 15 percent were unsure. 

The survey included nearly 200 compensation and human resource executives at large, publicly traded companies.

"The new rules may not have a large impact on executive pay levels or corporate performance, but they will strengthen the link between the two," says Ira Kay, global director of compensation consulting at Watson Wyatt.  "While executive pay-for-performance programs have generally been working well throughout corporate America , the greater transparency created by the rules should ensure that they continue to do so."

The SEC's new rules, which the agency approved in July, affect disclosure in proxy statements, annual reports, and registration statements, as well as the reporting of compensation arrangements. The rules require companies to provide clearer and more complete disclosure of compensation given to the chief executive officer, the chief financial officer, the three other highest paid executive officers, and directors. The rules will take effect with 2007 proxy filings.

You can learn more about the rules here.

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