Company Name: American Bar Association (ABA)
Public Availability Date: Dec. 11, 1992

STAFF REPLY LETTER

American Bar Association,
Subcommittee on Employee Benefits
and Executive Compensation
c/o W. Alan Kailer, Chairman
Jenkens & Gilchrist
1445 Ross Avenue, Suite 200
Dallas, Texas 75202

Dear Mr. Kailer:

This is in response to your request for the Divisions views on questions you have raised concerning the recently adopted revisions to the Commissions executive compensation disclosure requirements. Securities Act Release No. 6962 (Oct. 16, 1992) ("Adopting Release"). The following are the staffs responses, along with the questions you have presented. All references are to the items in Regulation S-K; the same analysis applies to the corresponding items in Regulation S-B.

Q1. The Adopting Release in Part II.B. states specifically that the "Other Annual Compensation" and "All Other Compensation" columns in the Summary Compensation Table need not include information for fiscal years ended before December 15, 1992. Does that mean that a registrant whose fiscal year ends before December 15, 1992, and files a proxy statement after January 1, 1993 (for example, a registrant whose fiscal year ends on November 30, 1992), need not disclose any amounts in those columns for the most recent fiscal year included in the Summary Compensation Table?

Response: No. Information for the last completed fiscal year must be included by such companies. The transition provision permitting a three-year phase-in for disclosure of items reportable in the "Other Annual Compensation" and "All Other Compensation" columns does not permit nondisclosure of information for the companys last completed fiscal year.

Q2. Similarly, the Adopting Release in Part II.B. states that small business issuers need not provide any information for years ended before December 31, 1992. Does this mean that a small business issuer whose fiscal year ends on November 30, 1992, and provides disclosure under new Item 402 of Regulation S-B, may exclude all information relating to its fiscal year 1992 compensation from the Summary Compensation Table, and therefore exclude the Table itself?

Response: No. At least one years worth of compensation information must be provided by all registrants in the Summary Compensation Table. The three-year phase-in provided for small business issuers with respect to the entire Summary Compensation Table does not permit a different result.

Q3. Instruction 3 to Item 402(b)(2)(iii)(A) and (B) specifies the permitted treatment of salary or bonus that a named executive officer elects to receive in non-cash form.

(a) Does that instruction permit a registrant to report the value of free stock or other nonrestricted and noncontingent non-cash compensation received as annual salary or bonus in a column other than the Salary or Bonus column?

Response. No.

(b) May a registrant elect to use the treatment permitted by Instruction 3 to report salary or bonus awarded in restricted or contingent non-cash form, even where the named executive officer has no election?

Response: Yes.

Q4. The caption to column (b) of the Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Values Table (Item 402(d)(2)(ii)) refers only to the number of shares received upon exercise. It is unclear whether issuers must disclose only the net amount of securities or cash equivalents received on exercise of an SAR. By using this caption, does the Commission intend to require net rather than gross share disclosure in the case of SARs settled in stock or cash, even though the gross number of shares would be disclosed in the case of options exercised? If not, may registrants modify the caption in the case of SARs?

Response: The new rules do not, as a general rule, permit registrants to deviate from the highly formatted tabular presentations required except to omit any column or table otherwise not applicable. A limited exception has been made for the caption of column (b) in the Option/SAR Exercise table. The caption to that column may be modified to read: "Number of securities underlying options/SARs exercised." In all cases, the gross number of securities underlying the options/SARs exercised should be reported in this column.

Q5. For an LTIP plan that does not specify threshold or maximum payout amounts (for example, a plan in which each unit entitles the executive to $1.00 of payment for each $.01 increase in earnings per share during the performance period), there does not appear to be any clear guideline for determining the threshold and maximum amounts. Should the threshold and maximum levels be shown as "0" and "N/A" because the payouts theoretically may range from nothing to infinity? Or must the registrant disclose arbitrary sample threshold and maximum amounts?

Response: If the plans do not include thresholds or maximums (or equivalent items), these amounts need not be included.

Q6. Are consulting arrangements between the registrant and a director disclosable as director compensation under Item 402(g), even where such arrangements cover services provided by the director to the issuer other than as director (e.g., as an economist) and are otherwise disclosable under Item 404?

Response: Yes. This disclosure need not be repeated in complying with Item 402(j) or Item 404.

Q7. The Adopting Release states that the disclosure required for director legacy programs must specify the amount of the "amount paid." Does this permit a registrant to disclose only the amounts of premium paid under a legacy?

Response: No. Pursuant to the Instruction to Item 402(g)(2), which requires disclosure of the material terms of the arrangement, the amount of the total legacy or award must be specified.

Q8. The transition provision calls for inclusion of the new executive compensation disclosure in any new registration statement filed on or after January 1, 1993. Can a new registration statement on Form S-3 filed by an issuer after January 1, 1993, or a currently effective Form S-3 shelf, incorporate by reference the executive compensation disclosure filed in fiscal year 1992 in compliance with old Item 402, until a proxy statement is filed in connection with the issuers 1993 annual meeting?

Response: Yes.

Q9. Where the only disclosure that a registrant is required to provide pursuant to Item 402(j) is the identity of the members of the compensation committee, because the registrant has no transactions or relationships that trigger a disclosure obligation, may the registrant omit the Item 402(j) caption ("Compensation Committee Interlocks and Insider Participation")?

Response. Yes.

Q10. If no disclosure is required pursuant to Item 402(j) except disclosure of transactions or relationships that have occurred or were terminated prior to January 1, 1993, may a registrant omit the 402(j) caption and provide that disclosure pursuant to Item 404?

Response: Yes.

Q11. Instruction 2 to Item 402(b)(2)(iv) requires footnote disclosure of "the value of the aggregate restricted stock holdings at the end of the last completed fiscal year" and directs that the value "be calculated as specified in paragraph (b)(2)(iv)(A)." Does that calculation cross-reference mean that the aggregate restricted stock should be valued as of grant date?

Response. No. As Instruction 2 to Item 402(b)(2)(iv) states, the required disclosure is value "at the end of the last completed fiscal year."

Sincerely yours,

Catherine T. Dixon

Chief, Office of Disclosure Policy