The U.S. Securities and Exchange Commission says that publicly traded companies need to do a better job explaining executive compensation practices.

SEC staff published a report discussing its initial review of the disclosure of 350 public companies for compliance with the commission’s new and enhanced rules for executive compensation and related disclosure. Two principal themes emerged from these reviews are: companies should provide more focused disclosure of how and why they made specific executive compensation decisions; and, the manner of presentation is important, and companies can use it to provide more direct, specific, clear and understandable executive compensation disclosure.

John White, director of the SEC’s division of corporation finance, stated, “Since the new principles-based rules became effective in late 2006, public companies have provided their investors with the clearest and most complete disclosure ever regarding how much they pay their executives and directors. Our individualized comments and our observations should help companies enhance their future executive compensation disclosure and better explain their compensation policies and decisions.”

Several members of the commission’s staff will provide further context to the staff report in public appearances this week. The staff’s reviews of the 350 companies are ongoing. Not less than 45 days after it completes each review, the staff will post the correspondence containing the comments and company responses to comments on the SEC’s EDGAR system.

The staff report is available at:
http://www.sec.gov/divisions/corpfin/guidance/execcompdisclosure.htm.