Release No. 33-8732A Release No. 34-54302A Release No. IC-27444A

Securities and Exchange Commission

Executive Compensation and Related Person Disclosure
Section II

II. Executive and Director Compensation Disclosure

Executive and director compensation disclosure has been required since 1933, and the Commission has had disclosure rules in this area applicable to proxy statements since 1938. In 1992, the Commission proposed and adopted substantially revised rules that embody our current requirements.⁵⁷ In doing so, the Commission moved away from narrative disclosure and back to using tables that permit comparability from year to year and from company to company. As we noted in the Proposing Release, although the reasoning behind this approach remains fundamentally sound, significant changes are appropriate. Much of the concern with the tables adopted in 1992 had also been their strength: they were highly formatted and rigid.⁵⁸ Thus, information not specifically called for in the tables had sometimes not been provided. For example, the highly formatted and specific approach had led some to suggest that items that did not fit squarely within a box specified by the rules need not have been disclosed.⁵⁹ As another example, because the tables did not call for a single figure for total compensation, that information had generally not been provided prior to todays amendments, although there had been considerable commentary indicating that a single total figure is high on the list of information that some investors wish to have. To preserve the strengths of the former approach and build on them, we are taking several steps in adopting amendments to Item 402,⁶⁰ substantially as we proposed:

• First, we are retaining the tabular approach to provide clarity and comparability while improving the tabular disclosure requirements;
• Second, we are confirming that all elements of compensation must be included in the tables;
• Third, we are providing a format for the amended Summary Compensation Table that requires disclosure of a single figure for total compensation; and
• Finally, we are requiring narrative disclosure comprising both a general discussion and analysis of compensation and specific material information regarding tabular items where necessary to an understanding of the tabular disclosure.

⁵⁷ 1992 Release.

⁵⁸ See, e.g., Council of Institutional Investors Discussion Paper on Executive Pay Disclosure, Executive Compensation Disclosure: How it Works Now, How It Can Be Improved, at 11 (available at www.cii.org/site_files/pdfs/CII%20pay%20primer%20edited.pdf).

⁵⁹ For examples, see, e.g., The Corporate Counsel (Sept.Oct. 2005) at 6-7; The Corporate Counsel (Sept. Oct. 2004) at 7; but see Alan L. Beller, Director, Division of Corporation Finance, U.S. Securities and Exchange Commission, Remarks Before Conference of the NASPP, The Corporate Counsel and the Corporate Executive (Oct. 20, 2004) , available at www.sec.gov/news/speech/spch102004alb.htm.

⁶⁰ The discussion that follows focuses on amendments to Item 402 of Regulation S-K, with Section II.D.1. explaining the different amendments to Item 402 of Regulation S-B. References throughout the following discussion are to Items of Regulation S-K, unless otherwise indicated.