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The Securities and Exchange Commission is changing newly adopted rules governing the disclosure of executive and director compensation. In a statement released Friday, the agency said it is altering the requirements for disclosing the value of stock option awards and giving firms more flexibility in how they report those expenses. The SEC said the new rules should more closely conform with the reporting of stock option awards under standards in the Financial Accounting Standards Board’s rule FAS 123. That rule requires recognition of the costs of stock option awards over the period in which an employee is required to provide service in exchange for the award. Using this same approach when disclosing executive compensation will give investors a better idea of the compensation earned by an executive or director during a particular reporting period, the SEC explained in its announcement. The SEC compensation rules were the most extensive overhaul of executive-pay regulations in 14 years. The SEC received more than 20,000 comment letters, a record, before adopting the new rules in July. Rising compensation has been fueled by the growing use of incentive pay, such as cash bonuses, stock options and other awards. Those incentives have made it hard for investors to get a total pay number on top executives. Now companies must add a section to the annual proxy statement sent to shareholders that analyzes compensation. In this section, company directors and managers must describe in detail how they determined compensation for the chief executive and other top officials. SEC Chairman Christopher Cox has said the new requirements will shed new light on the quality of corporate governance and, with the more complete disclosure about payments or benefits to executives, excessive compensation packages may be reined in. The rule change will be effective once it’s published in the Federal Register. The SEC will take public comment for 30 days and make changes to its amended rules if necessary.

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