US: Executive pay little affected by disclosure rules

A MAJORITY of corporate HR and compensation executives in the US believe that the Securities and Exchange Commission’s (SEC) new executive pay disclosure rules will not have much of an impact on executive pay levels.

The SEC’s new rules are the most sweeping rewrite of executive compensation disclosures since the early 1990s. They were adopted by the SEC in July and will take effect with the 2007 proxy filings.

Only 28 per cent of companies said the rules will decrease executive pay levels, while a majority (54 per cent) said the new rules will not have any effect on executive pay levels.

A further 3 per cent think that the rules will lead to higher pay levels, while most companies (73 per cent) said the new rules will not improve corporate performance, compared with 11 per cent who think they will.

“The new rules may not have a large impact on executive pay levels or corporate performance, but they will strengthen the link between the two,”said Ira Kay, global director of compensation consulting at Watson Wyatt, which conducted the research.

“While executive pay-for-performance programs have generally been working well throughout corporate America, the greater transparency created by the rules should ensure that they continue to do so.”

Still, companies are not planning immediate changes to their compensation programs in response to the rules. Only 5 per cent of those polled plan to change their programs, while 49 per cent are not planning changes and 45 per cent have not yet decided.

“For now, most companies plan to stick with their current pay programs, although that may change over the long term,” said Kay.

“The new rules will add pressure on companies to increase their reliance on performance-based compensation and decrease the value of supplemental retirement plans, severance packages and perquisites.”

Watson Wyatt polled nearly 200 compensation and human resource executives at large publicly traded companies.