“Sunlight,” remarked the Supreme Court justice Louis D. Brandeis, “is said to be the best of disinfectants.” One problem with too much sunlight, however, can be the blinding glare.
That, in many ways, captures what compensation experts say are positive and negative developments in the newest round of executive pay disclosures. In response to a barrage of criticism that regulators have not kept up with the complexities of swelling pay packages, the Securities and Exchange Commission now requires corporate America to disclose details of executive compensation more fully. As this year’s proxies pour in, they are packed with fresh information aimed at making pay more transparent.
Inclusion of new data, like the value of retirement benefits and potential severance payouts, was supposed to paint a fuller picture of everything that an executive could make. Disclosure of such things as the performance criteria used to award lucrative bonuses was supposed to make the pay-setting process clearer. And the addition of a single headline number that tallied up all the elements of annual compensation was supposed to make different executive pay packages easier to compare. But while all the new disclosure rules have resulted in far more information, analysts say they still do not necessarily offer greater insight.
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