Cox: New pay disclosures ‘overlawyered’

By Dominic Jones

LAST week, IR Web Report published results of our snap survey of the readability of 40 companies’ new executive pay discussions.

We found that the average compensation discussion and analysis section in firms’ most recent proxy statements has the same readability level as a Harvard Law Journal article. They probably would not be understood by two-thirds of U.S. adults — this despite requirements that they be written in plain English.

It seems that the problem has not gone unnoticed by the U.S. Securities and Exchange Commission. In a speech yesterday, chairman Christopher Cox said the commission was “seeing examples of overlawyering that are leading to 30- and 40-page long executive compensation sections in proxy statements.”

He said there were cases of “slavish adherence to boilerplate disclosure” including companies having columns in the summary compensation tables even when they have nothing to report in them.

Cox said that while the SEC will allow companies leeway to get used to the new rules, “the plain English part of executive compensation will be increasingly strictly enforced in the coming year.”

Update: The Washington Post via Bloomberg covers the plain English issue.

Related: CEO pay disclosures dense as academic texts

Please Support Our Work
Email your friends about us. Subscribe to our paid publication Online IR Trends Quarterly. Get us to recommend improvements to your IR website (we're really good at it).