By James Hamilton, J.D., LL.M.
Even before interactive data becomes the norm for all reporting companies, promised Chairman Christopher Cox, the SEC plans to tag the new executive compensation data using XBRL. In addition, by June, an interactive data tool will be on the SEC's website to let users slice and dice the executive compensation data any way they like, or do industry comparisons, or even do analyses of particular forms of compensation, such as stock options. This will be done for at least several hundred of the largest public companies.
In remarks at the Georgetown Law Center, Chairman Cox also noted that the XBRL codes are already written for most industries. And, he continued, by September, XBRL-US, the private sector organization that is responsible for interactive data in the United States, will have completed all the data tags for every industry. They intend to make it available to the world for free, he related.
Against the backdrop of a new executive compensation disclosure regime, the SEC chair said that the Commission is seeing examples of overlawyering, which is leading to 30 to 40 page executive compensation sections in proxy statements. Companies are including columns in the summary compensation tables even when there's nothing to report in those columns. He admonished that this kind of slavish adherence to boilerplate disclosure is what the SEC is trying to stamp out.
Noting that it was the birthday of Oliver Wendell Holmes, Chairman Cox wondered why, if Justice Holmes could cover great legal theories in one page of clean prose with no jargon, a proxy statement cannot tell readers what they need to know about the boss's pay in the same way.
Finally, the chair took the opportunity to extol the virtues of the new mandated Compensation Discussion and Analysis section. This chance for a company to detail the objectives of its compensation program, he enthused, is what good disclosure is all about and where inside counsel can play a vital role. He explained that the narrative in the CD&A provides a qualitative look at the company's executive compensation policies, and sheds light on the quantitative tabular data. He strongly urged companies to seize this chance to plainly tell their compensation story.