In a development that surprised few securities law experts, the U.S. Securities and Exchange Commission has proposed a wide array of compensation and governance rules in response to the recent U.S. financial market turmoil. On July 10, the SEC issued a set of proposed rules calling for public companies to provide detailed disclosure of compensation policies as they relate to risk, board of directors risk-management activities and director qualifications, as well as several other compensation-related matters.
The SEC has been extremely active in the executive-compensation arena for years prior to the financial market meltdown in 2008, and its proposed rules may be viewed as another (some may say late) step in the agency’s march toward more vigorous compensation disclosure. Between 2003 and 2006, the SEC adopted new rules that improved transparency of director nominating-committee processes, executive officer and director compensation, related-party transactions and director independence.
