Companies Continue To Keep
Executive Bonus Targets Under Wraps
DOW JONES NEWSWIRES
March 29, 2007 7:31 a.m.
By Kaja Whitehouse
Of DOW JONES NEWSWIRES
(This article was originally published Wednesday)
NEW YORK (Dow Jones)--Despite some pressure from the
Securities and Exchange Commission, many companies continue to keep the
financial targets used to determine executive bonuses under wraps.
Almost half of the 100 companies studied, or 46%,
didn't disclose the targets that triggered annual bonus payments to
executives last year, such as earnings per share of $2. Slightly fewer,
or 45%, also failed to shed light on the targets tied to their long-term
incentive plans, according to consulting firm Watson Wyatt Worldwide
Inc. (WW), which conducted the study.
While almost half of companies didn't disclose the
specific financial targets, they all disclosed the general financial
metrics used in their executive compensation plans, such as EPS or net
income, the study said.
How companies decide to dole out bonuses has been a hot
topic as shareholders push for better insight into the links between
executive pay and performance. Companies regularly stop short of
spelling out how these plans work, leaving out financial targets and
other figures shareholders would need to fully assess these awards.
Watson Wyatt looked at bonus disclosures of the first
100 companies in the S&P 500 index that complied with the SEC's new
compensation disclosure rules, effective this year. The new rules
overhaul how companies explain their executive pay practices, which are
revealed in companies' annual proxy statements.
Without the financial targets, it's unlikely that
shareholders will be able to make an "informed external opinion" about
these plans, Ira Kay, executive compensation consultant with Watson
Wyatt, told Dow Jones Newswires.
Last year, shareholders pressured the SEC to require
companies to be more forthcoming about their pay for performance plans.
The SEC has long allowed companies to hold back on details that might be
considered confidential business information, such as whether bonuses
are contingent on a certain sales or revenue numbers.
Some large shareholders suggested that the SEC require
companies to disclose the bonus targets after the performance period had
ended.
The SEC ultimately kept its rules the same, but warned
companies that it would be reviewing their bonus disclosures to ensure
that they weren't hiding behind the confidentiality rule.
Companies "really agonized over this issue" as they
prepared their compensation disclosures, said Kay. "They are struggling
to balance the competitive issue with the transparency that the
shareholders and the SEC are desiring," he said.
By Kaja Whitehouse, Dow Jones Newswires; 201-938-2243;
kaja.whitehouse@dowjones.com
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