Will the CD&A Be Filed or Furnished: We May Know this Week

As the proposed executive compensation rules move toward almost certain adoption at this Wednesday's SEC open meeting, it will be very interesting to see if the SEC heeds the comments of the American Bar Association and others concerning the filing of the brand new Compensation Discussion & Analysis and does not require that it be filed as part of the Form 10-K which, in turn, would not make it subject to the Sarbanes-Oxley Act certification requirements of Section 302. As I understand their argument, it is that the filing of the CD&A and the subsequent certification requirement will compel CEO's and CFO's to get intimately involved with the processes and even the deliberations of the compensation committee, thereby playing a role in setting their own pay. In turn, this would run counter to sound corporate governance since good governance practices dictate that senior officers should be excluded from compensation committee deliberations about their own pay. This is a plausible argument, in my opinion. If you buy the argument, it inexorably leads to the conclusion that the proposed filing of the CD&A runs counter to good corporate governance and, more broadly, runs counter to the direction that Sarbanes-Oxley wants to take the corporate community.