The Securities and Exchange Commission is about to give shareholders a whole lot more power.
Investors in publicly traded companies already vote on executive pay, but now the SEC wants to help them better understand the decisions they’re making, reported The Wall Street Journal’s Andrew Ackerman and Joann S. Lublin.
Basically the SEC’s proposal, which is actually part of the 2010 Dodd-Frank bank regulations, will help shareholders make informed decisions by comparing executive pay with the companies’ financial performance — measured, importantly, by total shareholder return.
How would this look on paper? For one thing, companies would need to start including a new table in their SEC filings disclosing “actual pay” (which would not include vested shares), according to the report.
Right now, CEOs earn some 124x their average bankers. Goldman Sachs’ CEO Lloyd Blankfein’s compensation rose by $US1 million last year from the year prior, to a total $US24 million, while Morgan Stanley’s CEO, James Gorman, saw his pay jump by a third.
The SEC also wants to force companies to disclose their pay gaps between chief executives and other employees, according to the report. That’s in keeping with an ongoing SEC effort to tackle executive compensation and punish risky behaviour.
But as for this latest proposal, it is the shareholders, not the regulators, who will emerge the real winners.