The Securities and Exchange Commission’s Interpretive Guidance on Executive Compensation Disclosure Rules
By C.J. Schmidt III, Esq.
The Securities and Exchange Commission (“SEC”) has issued interpretive guidance on the new Executive Compensation Disclosure Rules. Here are some of the items discussed in the Interpretive Guidance:
Equity Awards. Awards made after the close of a fiscal year which relate to an executive’s performance in that completed fiscal year should be reported in the Grant of Plan-Based Awards Table (“GPBAT”) for the year of the grant, and in the Summary Compensation Table (“SCT”) in accordance with FAS 123(R). An equity incentive plan award denominated in dollars but payable in stock should be disclosed in the GPBAT by including the dollar value and a footnote to explain that it will be paid out in the number of shares equal to the dollar amount at the time of the payout.
The valuation assumptions of all equity awards reported in the SCT must be disclosed or properly cross-referenced in a footnote to the SCT, not just the assumptions for awards made in the last completed fiscal year.
Pension Benefits. The earliest age at which a named executive officer may receive an unreduced pension benefit under the terms of an applicable pension plan must be used to calculate the actuarial present value of that executive officer’s accumulated pension benefit for the purposes of the Pension Benefits Table.
Deferred Compensation. Earnings on amounts credited under a non-qualified excess deferred compensation plan, which is operated in tandem with respect to the investment alternatives offered under a tax-qualified plan, generally are not reported in the SCT as “above market” or “preferential earnings.” According to the SEC, this reporting may not be available for top-hat plans or SERPs that bear no relationship to a company’s tax-qualified plans.
Director Compensation. Director Compensation disclosure is required for any person who served as a director during any part of the last completed fiscal year. This is true even if the person was no longer a director at the end of the fiscal year, or will not stand for re-election the following year.
Employee-directors, other than named executive officers, who receive no compensation for their services as a director do not need to be included in the Director Compensation Table. A footnote should indicate that the director is an executive officer, other than a named executive officer, who receives no additional compensation for director-related services.
admin @ June 20, 2007