(The news featured
below is a selection from the news covered in Federal Securities Law Reporter,
which is distributed to subscribers of Federal
Securities Law Reporter.)
Guidance Offered on Compensation Disclosure
The SEC staff has issued a series of questions and answers
relating to the executive compensation disclosure required by Regulation S-K
Item 402 and has provided interpretive responses with respect to particular
situations that may arise. The January 2007 guidance replaces the Item 402
interpretations in the staff's telephone interpretation manual.
Initially, the staff addressed a timing question. A company
that is restating its financial statements and has not filed its Form 10-K for
the fiscal year ending December 31, 2005 is not required to comply with the new
rules when it files the 10-K for the 2005 fiscal year.
The disclosure provisions in the new Compensation
Discussion and Analysis requirement that relate to option grants also govern the
disclosure about restricted stock and other non-option equity awards. For
example, it may be appropriate to discuss how the award dates were computed.
Companies may be required to disclose information about programs, plans or
practices that occurred outside the scope of the information contained in the
tables.
In determining whether a company may omit the disclosure of
performance target levels, the company should use the same standard it uses when
requesting confidential treatment. A confidential treatment request is not
required in connection with the omission of performance target levels or other
factors or criteria, but the company must determine whether the disclosure would
cause competitive harm as outlined in case law. The company may be required to
demonstrate that withholding the information meets the confidential treatment
standard. If the staff determines that the standard is not met, the performance
target levels will have to be disclosed.
If a perquisite or other personal benefit has no aggregate
incremental cost, it still must be identified by type. If an executive officer
has fully reimbursed the company for the cost, it would not be considered a
perquisite or other personal benefit and would not have to be separately
identified by type.
In the table for grants of plan-based awards, if all of the
awards pursuant to an equity incentive plan are denominated in dollars but
payable in stock, the registrant should include the dollar value and a footnote
to explain that the number of shares will be paid in a number that the dollar
amount translates into at the time of payout. If all of the awards are
structured in this manner, the column captions may be changed to a dollar sign
rather than a number.
Outstanding in-kind earnings at the end of a fiscal year
should be included in the Outstanding Equity Awards at Fiscal Year-End Table.
In-kind earnings that vested during the fiscal year or that are already vested
when the dividends are declared should be reported in the Option Exercises and
Stock Vested Table.
With respect to pension benefits, companies may not deviate
from the assumptions used for accounting purposes to reflect the individual
circumstances of a named executive or the pension plan. When a pension plan has
a "normal" retirement age but permits an executive officer to receive
benefits at a younger age without any reduction in benefits, the younger age
should be used to determine the benefits. The older age may be included as an
additional column.
For purposes of calculating the actuarial present value
for the Pension Benefits Table, the registrant should assume that each named
executive officer will live to and retire at the plan's normal retirement age,
or at the earlier age at which the officer may retire without any reduction in
benefits. The registrant should ignore what actuaries refer to as preretirement
decrements for purposes of the calculation.
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