WASHINGTON — Federal regulators voted Wednesday to require companies to reveal more information about how they pay their executives amid a public outcry over compensation.
The 4-1 Securities and Exchange Commission vote expands disclosure requirements for public companies.
Company policies that encouraged excessive risk-taking and rewarded executives for delivering short-term profits were blamed for fueling the financial crisis.
The SEC also changed a formula that critics say allowed companies to understate how much their senior executives are paid.
At issue is how public companies report stock options and stock awards in regulatory filings. Such awards often make up most of top executives’ pay.
The new requirements include information on how a company’s pay policies might encourage too much risk-taking.
Separately, the agency voted unanimously to require thousands of investment advisers who have custody of clients’ money to submit to annual surprise exams by outside auditors.
The surprise audits would allow independent accountants to review the books and verify that the money is there. The snap audits would apply to about 1,600 investment advisers that don’t use third-party custodians, out of roughly 11,000 advisers registered with the SEC.
This move is aimed at plugging gaps that allowed disgraced money manager Bernard Madoff to deceive investors. The expanded executive pay disclosure rules will take effect next spring, when companies send annual proxy disclosures to shareholders.
Required SEC disclosures
• Expanded information about executive compensation
• Legal actions involving the company’s executive officers, directors and board nominees
• The role of diversity as a factor in choosing board candidates
• Potential conflicts of interest on the part of compensation consultants retained by the company
