The Securities and Exchange Commission says that corporations are falling short of their requirements to explain to investors exactly how executives are being compensated and for what work. Officials completed their first review of the new pay disclosure rules yesterday and called on corporations to give ivnestors more insights into how they make compensation decisions and to ensure that proxies containing pay votes are very clear and understandable. Meanwhile, boards of directors could also be doing a better job in discussing exactly how they choose performance targets, severance packages and peer companies that they use for comparison. In the end, the SEC stated that they found a lot more disclosure but a severe lack of analysis. That is, while companies are disclosing all the appropriate numbers, they fail to explain to investors exactly why executives are earning the compensation that they receive.

The SEC has also kept extremely busy reviewing these compensation reports over the summer. In fact, over 250 letters were sent asking that companies provide additional explanations and data; however, most of these were requests that companies keep these things in mind for the future instead of amend existing filings. In the end, this year is more of a testing phase for companies to get use to the rules before they are strictly enforced by the SEC. Regulators are expected to start cracking down on companies omitting disclosures next year - particularly those that do not give or explain performance targets or give any context to how difficult the goals are to achieve.