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SEC Considers Revamping Reg S-K

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February 11, 2014 | Barbara Baksa

SEC Considers Revamping Reg S-K

Just when you thought you were finally getting a handle on the executive compensation disclosures, the SEC is considering changing them.  According to an alert by McGuireWoods, the SEC staff has reviewed the disclosure requirements of Reg S-K (all of them, not just the disclosures relating to executive compensation) and issued a report that includes recommendations for further review.  The JOBS Act of 2012 (not to be confused with the Jobs Creation Act of 2004) required the study with respect to disclosures by emerging growth companies, but the SEC expanded it to cover all companies.

The staff's recommendations with respect to the executive compensation disclosures are fairly vague; they point out that these disclosures can be quite lengthy and technical and further review might be warranted on this basis, as well as to confirm that the information disclosed is useful to investors.  The staff also suggests that the disclosures be reviewed to determine if they need to be made simpler for smaller companies. 

So maybe the disclosures will change and maybe they won't.  According to the report, there weren't any comments submitted to the SEC's JOBS Act website on the executive compensation disclosures.  Interestingly, there were two comments suggesting that the table disclosing the number of shares outstanding and available for grant under stock plans approved by shareholders and not approved by shareholders could be eliminated (and one comment that this table shouldn't be eliminated, proving once again that you can't please all the people, all the time). 

According to McGuireWoods, at this time, the SEC is still formulating an action plan with respect to the study; a time frame hasn't been specified for completing any further reviews called for under the study, much less promulgating and transitioning to any new rules.

Did You Know?

I did learn a couple of interesting tidbits when reading the section of the SEC's report that covered the executive compensation disclosures. I thought you might be interested to know that:

  • The executive compensation disclosure rules have been amended more often than any other rules for disclosures required under Reg S-K.
  • The executive compensation disclosures, albeit in a very different format, have been around since the very first registration statement (Form A-1) implemented in 1933. 
  • Back in 1933, the disclosure was required for any directors, officers, or other persons earning in excess of $25,000.  This seems like a pretty low threshold, but then I ran the amount through the Bureau of Labor Statistic's inflation calculator.  In today's dollars, that's around $450,000.
  • In 1972, the threshold for disclosure was increased to compensation in excess of $40,000. According to the inflation calculator, that's around $223,000 in today's dollars. 
  • It wasn't until 1992 that the threshold was increased to $100,000. In today's dollars, that's about $166,000.  $40,000 in 1972 was the equivalent of about $134,000 in 1992, so my guess is that we have a ways to go until the SEC decides to increase the threshold again.

- Barbara

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