The SEC recently shed more light on its newly proposed rule, which now would require non-executives who make "significant policy decisions" to disclose their compensation. In a 436 page proposal posted on their website on August 11th, the SEC made the following comments regarding the new rule:

"We also solicit additional comments regarding the proposed disclosure requirement of the total compensation and job description of up to an additional three most highly compensated employees who are not executive officers or directors but who earn more than the named executive officers. In particular, we have specific requests for comment as to whether the proposal should be modified to apply only to large accelerated filers who would disclose the total compensation for the most recent fiscal year and a description of the job position for each of their three most highly compensated employees whose total compensation is greater than any of the named executive officers, whether or not such persons are executive officers. Under this approach, employees who have no responsibility for significant policy decisions within either the company, a significant subsidiary or a principal business unit, division, or function, would be excluded from the determination of the three most highly compensated employees and no disclosure regarding them would be required."

Why is this rule necessary? In the past, some companies have placed their top decision-makers in non-officer positions in order to conceal their compensation. This new rule would require mid to large cap companies to disclose the pay of their top employees, who would be identified by their salary and position rather than their name. These employees would have to make more than one of the top five executives in order to be listed. According to the SEC, these people could be "the director of a news division of a major television network, a portfolio manager in charge of equity funds at a money management firm, or the head of technological innovation unit". Meanwhile, the SEC insisted that "a salesperson, entertainment personality, actor, singer, or professional athlete who is highly compensated but who does not have responsibility for significant policy decisions would not be the type of employee about whom we would seek disclosure".

This article is the first in a series of articles regarding the SEC's newly proposed executive compensation rules. The proposal is currently in its final stages with a request for additional comment.