By James Hamilton, J.D., LL.M.
While the SEC has dropped the universally condemned requirement that the total compensation and job positions of each of a company's three most highly compensated non-executive employees must be disclosed, the Commission’s reproposal may accomplish the same thing through an overly broad definition of policymaking. That at least appears to be the view of Commissioner Paul Atkins.
Under the reproposal, the company would have to disclose the compensation of the three most highly compensated non-executive employees, but excluding employees with no responsibility for significant policy decisions within the company. The reproposal is evidently designed to address the main argument of commenters that the compensation of non-policymaking employees should not be subject to disclosure. The SEC also said that the requirement would apply only to large accelerated filers, which is narrower than the original proposal because it now applies to fewer companies, albeit still 3,500 companies.
According to Commissioner Atkins, the devil is in the interpretation of policymaking. If, as the proposal in its current form provides, an employee becomes a policymaker through exercising "strategic, technical, editorial, creative, managerial, or similar responsibilities," he posits that few highly-compensated employees would not be policymakers. Almost every job has some of these attributes, he reasoned. Atkins also emphasized that tracking the compensation of employees who might potentially fit this bill across a large multi-national corporation with differing internal systems and managerial methods will be a costly undertaking. In his view, the reproposal goes beyond the purpose of executive compensation disclosure, which is to provide better information to stockholders for purposes of evaluating the actions of the board of directors in fulfilling its duties.