January 18, 2022
Agenda – SEC Guidance on Exec Comp Puts More Pressure on Boards
Companies set to give stock option awards to executives ahead of a significant corporate announcement should take notice of new guidance from the U.S. Securities and Exchange Commission that additional disclosures are needed in such cases. The announcement puts further pressure on directors to be transparent and detailed about executive compensation matters in their filings to the authorities and investors.
According to Marc Hodak, a partner at Farient Advisors, the new guidelines are better for transparency and investor relations. If companies have to work harder to reflect the real value of executive compensation packages, then organizations also have to account for the award’s value in their reserves, which may temper how many options are given to executives.
“It may not seem fair [to investors] that management is getting a bump that the rest of the investors can’t benefit from,” said Hodak. “The [guidance] is a small step in favor of creating a perception of fairness in how executives get paid relative to the ordinary workers.”