The Securities and Exchange Commission proposed a reduction yesterday in the amount of information that companies must give their stockholders about the compensation of top management.
Under the proposal, only cash remuneration--salary and bonuses--would be listed in the compensation table. Noncash items, such as vested pension benefits, would appear elsewhere in the text. Perquisites would be listed only if they exceed $10,000 or 10 percent of cash compensation.
Moreover, the value of stock options issued to executives would have to be reported only when granted and not yearly as now required. And disclosure would no longer be required for all corporate officers, but just for the policy-making executives as well as the top five moneymakers.
The commission said the changes, which would go into effect for 1984 proxy reports, are intended to simplify overly complex and costly disclosure requirements by cutting the regulations back 75 percent. The simplification was generated by industry complaints and by the SEC's concern that even financial publications were unable to agree on a uniform interpretation of the material disclosed in proxies.
Critics charged the measures would push disclosure back to pre-1978 days when shareholders had great difficulty determining how much executives were making.
At yesterday's meeting, the commissioners disagreed over the worth of such information to shareholders in buying stocks, although all agreed that companies want less and analysts want more. A survey showed that analysts consider this data very important, second only to news about acquisitions and mergers.
Commissioner Barbara Thomas argued that proxy statements are far too confusing now for shareholders, few of whom read them anyway. It is not really material to them in selecting a stock how many times the family of an executive got a free ride on the company plane, she said.
Chairman John R. Shad claimed that excessive disclosure leads to ego and morale problems within a company and raids on personnel from without. Commissioner Bevis Longstreth questioned the goal of disclosure: whether it is meant to inform shareholders or to deter greed.
Shad's allegation that only 4 or 5 percent of stockholders read the proxy material was challenged later by Margaret Sullivan, president of the Stockholders of America, a 5,000-member organization. She said a 1982 SOA survey showed 84 percent were interested in compensation and 79 percent in perks. The average time spent reading the proxy was about 30 minutes.
Tony Cope, chairman of the corporate information committee of the Financial Analysts Federation, said the SEC's proposals on compensation disclosure were reasonable.
Former SEC chairman Harold M. Williams, under whose aegis the disclosure requirements were instituted in 1978, disagreed and said, "It's a reversion to the old problem of hide-and-seek. It will be hard to get a comprehensive view of management compensation when portions are redistributed throughout the proxy statement."