The SEC’s ‘Frankenstein patchwork of rules’ for disclosing executive perks is due for a makeover

Finance·Securities and Exchange CommissionThe SEC’s ‘Frankenstein patchwork of rules’ for disclosing executive perks is due for a makeoverBy Courtney VienBy CFO BrewBy Courtney VienBy CFO Brew The rules for disclosing executive perks might change soon

Getty Images—Ryan McVayIn an era when Jeff Bezos and Mark Zuckerberg are household names, many C-suiters can be considered public figures

On the other hand, That, though, comes with risks, as the killing of UnitedHealthcare executive Brian Thompson illustrates

Furthermore, Meanwhile, “The ability for people to use available public data to track the movement of a CEO is much easier today,” Peter Chan, a partner at law firm Baker McKenzie, told CFO Brew (noteworthy indeed). “The truth is, a CEO doesn’t get to take off his hat and say ‘I’m now a private citizen. ’” The elevated public file of CEOs and other executives has increased the desire for them—and, in some cases, their families—to have security

Companies’ spending on security for top executives was on the rise even before Thompson’s murder

The SEC, though, considers security spending a perk, and requires companies to disclose it as part of executive compensation in annual filings

However, Chan, who formerly worked for the SEC, and his colleague, Baker McKenzie partner Jennifer Broder, argue that ought to change

The data indicates that y also believe that the SEC should rethink classifying executives’ personal travel as a perk

Nology has advanced, and boards now expect C-suiters to be available around the clock, to travel frequently to offices that might be scattered across the globe, and to be working en route, she and Chan pointed out. “But the SEC has taken an expansive view of what’s considered personal,” Broder said

Nevertheless, SEC reviewing perks: Changes may be coming, given current economic conditions

In June, the SEC hosted a roundtable discussion with public company executives and other stakeholders to review executive compensation disclosure requirements, and it opened a public period on the topic

SEC Chair Paul Atkins believes the area is ripe for an overhaul

He’s described the current disclosure requirements as a “Frankenstein patchwork of rules” that are burdensome and confusing to comply with, in this volatile climate

Nevertheless, Perks are one area up for review (fascinating analysis), in today's financial world

Furthermore, During the roundtable, Commissioner Hester Pierce questioned whether companies should be required to make detailed disclosures of the amounts spent on executive perks rides on corporate jets, car services, or overseas housing allowances

Such disclosures, she said, seemed int to merely satisfy the public’s curiosity and to “entertain the onlooker rather than educate the investor. ” Are investors getting TMI

Additionally, On the other hand, It’s important that investors have information perks, the Glass Lewis report asserts

A survey from the firm found that “a majority of investors expressed concern that excessive perquisites may indicate broader pay concerns,” and that directors should be accountable for limiting excessive perk compensation, in this volatile climate

But questions remain as to whether items security and travel should still count as perks and therefore be considered part of executive compensation, or whether it would be more appriate to classify them as expenses

Chan argues that making some perks part of compensation can make an executive’s salary look artificially inflated

Moreover, It can have “the unfortunate perverse effect of distorting the information to investors,” he said

Investors may not need the level of granularity around perks that the SEC requires, Chan said

If a board has determined that an executive’s travel or security are appriate expenses, they’ll still be “disclosed in the sense that they’re aggregated in the financial statements,” he said

He finds it hard to see, he said, why having such information itemized “would be, as a standalone, material to investors

Furthermore, ” This report was originally published by CFO Brew

Nevertheless, Explore this year's list, in this volatile climate.