Mary Schapiro’s Securities and Exchange Commission has called for comments on a rule proposal that would enhance proxy disclosure requirements in the area of compensation and risk. The proposal, SEC Proxy Disclosure and Solicitation Enhancements, pushes for greater details on the relationship between compensation and risk, as well as disclosures regarding director background, company leadership structure, and compensation consultants by public companies.
The NACD’s SEC comment letter takes the following positions on the SEC proposal:
- NACD supports improved disclosure on the board’s role in risk oversight, including compensation matters as they relate to risk, on a limited basis: NACD disagrees with the SEC’s proposal to expand the scope of the CD&A to require disclosure concerning a company’s overall compensation program as it relates to risk management and or risk-taking incentives. NACD supports the idea that compensation information is an important feature of the risk discussion. Companies should be encouraged to provide this information in the most appropriate format, including narrative explanation.
- Whether freshman or long-serving director, we believe that experience and education should be reported so that those shareholders making judgments on a director candidate’s capability to serve are adequately informed.
- NACD supports the principle of an independent board leader.
- NACD supports the disclosure of all additional services provided by the compensation consultant to the company or its affiliates during the last fiscal year, along with an explanation of why these services were sought. However, NACD does not support disclosure of aggregate fees paid for executive pay consulting vs. all additional services.
- NACD does not believe boards need to disclose whether management recommended or screened the engagement of the compensation consultant. NACD does agree that, when the board (or a compensation committee) approves additional services, they should disclosure the nature of these services.
- NACD believes that there should be a separate undertaking by the SEC to review all the current requirements in the proxy statement, item by item, so they all get proper consideration.