New Compensation Committee Report Is Bone to Corporate Community

In the recent adoption of a new executive compensation disclosure regime, commenters failed to get the SEC to retreat from mandating that the new Compensation Discussion and Analysis be filed and hence subject to Sarbanes-Oxley certification. But in an effort to take the sting out of the new certification document, the Commission did require a separate compensation committee report over the names of committee members as a means of emphasizing the committee’s involvement in the disclosure. And, most importantly, the report will provide additional information to which the principal executive officer and principal financial officer may look to in completing their personal Sarbanes-Oxley certifications of the CD&A.

The new compensation committee report responds to concerns that compensation committees should continue to be focused on the executive compensation disclosure process. This new report requires the committee to state whether it has reviewed and discussed the CD&A with management and, based on the review and discussions, has recommended to the board of directors that the CD&A be included in the company’s annual report on Form 10-K and, as applicable, the company’s proxy or information statement. And, the compensation committee report will have to be included or incorporated by reference into the company’s 10-K, so that it is presented along with the CD&A.