January 4, 2007

Disclosure about Compensation Consultants

As I blogged about a few months back, a group of institutional investors sent letters to major companies seeking to elicit more disclosure about how those companies utilize compensaiton consultants. The disclosure sought exceeds the requirements adopted by the SEC last August.

Specifically, the investors sought disclosure about whether the companies hire compensation consultants that provide services to the company beyond advising on CEO pay and whether the companies have a policy prohibiting such perceived conflicts. So far, 18 of the 25 companies that received the request have responded – and most of them said they have taken steps to ensure the independence of consultants who advise their boards on executive pay. Here are the response letters from the 18 companies – and a January 2nd press release from the investor group.

On pages 49-50 of its proxy statement last year, Pfizer was the first company to provide such disclosure by naming their compensation consultant, discussing what they are engaged for, noting other work done for the company and the dollar amount of the fees, pointing out that it is the compensation committee that has engaged the consultant, and describing the consultant’s involvement with compensation committee meetings.

Now, Vineeta Anand of Bloomberg reports in this article that General Electric will provide similar disclosure to Pfizer’s in this year’s proxy statement. I imagine that many – if not all – of the 18 other companies that responded to the institutional investors will do the same…

January Eminders is Up!

The January issue of our monthly email newsletter is now available.

SEC Releases Two Economic Studies on Mutual Fund Governance

As part of the re-proposal of the SEC’s mutual fund governance rulemaking, the SEC’s Chief Economist has issued two reports – here and here – that outline the difficulties in evaluating the benefits of a rule requiring 75% of mutual-fund directors to be independent. The 60-day comment period commenced from the release of these reports on December 29th. Here is an article from today’s WSJ describing the two reports.