New SEC Executive Compensation Proposal

The SEC has proposed new rules [pdf] to drastically increase requirements on executive compensation disclosure. You can read a summary of the proposal in the SEC’s press release, as well as statements from Chairman Cox and Commissioner Atkin.

Securities regulation is the United States is primarily centered on required disclosures, and this latest proposal by the SEC has renewed debate on disclosure regulation. Larry Ribstein has a number of posts criticizing the proposal, Geoffrey Manne has two very interesting posts discussing the costs of disclosure regulation, Stephen Bainbridge weighs in on disclosure regulation here and here.

While most of the corporate law academics are concerned that disclosure regulation has gone too far in imposing costs on corporations, others believe that regulation has not gone far enough. Pending in the House of Representations is the Protection Against Executive Compensation Abuse Act, which would require that issuers of a certain size not only disclose but also obtain shareholder approval for compensation of “principal executive officers,” including severance compensation. Christine Hurt comments on shareholder approval requirements here.

The new proposal isn’t the only controversy surrounding executive compensation. Last year FASB adopted a rule, SFAS 123R, requiring that the grant of stock options be treated as an expense for accounting purposes. Richard Booth and Geoffrey Manne weigh in on that issue.

[I posted this to MetaFilter earlier today.]