Executive pay transparency

THE BALTIMORE SUN

The Securities and Exchange Commission's move yesterday to require a lot more transparency by corporations in reporting their top executives' pay is needed and long overdue.

The proposal, unanimously approved by the five SEC commissioners, would force companies for the first time to add up in a single table on their annual filings all the various elements of executives' pay packages - salary, bonuses, stock options, perquisites and pension deals - to accurately show their total compensation. Not insignificantly, it also would require corporations to use simple, understandable terms when disclosing their executive pay deals.

All that would be a big improvement because right now investors have to be adept at digging through assorted financial filings on their own to gather a clear picture of executive compensation deals.

Indeed, the current system so lacks transparency that it seems to encourage hidden, if not outrageous, pay arrangements - which have continued despite tighter public and federal oversight of corporate excesses since the big accounting scandals earlier this decade.

Unfortunately, the SEC proposal, now subject to a 60-day public comment period, does nothing to directly address the overall national scandal in executive pay at major U.S. corporations.

Top executives' compensation continues to average in excess of 400 times average workers' pay, according to multiple studies, or almost $10 million dollars per CEO - with too often not much of a link between that level of pay and long-term corporate financial performance.

And that average may not fully account for certain lavish and hidden retirement deals, such as those discovered in former General Electric CEO Jack Welch's 2002 divorce proceedings, or overly generous merger-related pay, such as recently revealed for Constellation Energy CEO Mayo A. Shattuck III (conservatively estimated by Sun columnist Jay Hancock to total at least $40 million).

Corporate watchdogs and some pension and mutual fund managers have raised alarms about soaring executive pay for some time now. Let's hope that the SEC's move toward transparency wakes up the wider body of shareholders. That's the only way that excessive executive pay will be brought under reasonable control.

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