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Cox Discusses Plain English and the Role of Lawyers

In remarks to the Corporate Counsel Institute, SEC Chairman Christopher Cox discussed the SEC's "war on complexity" in SEC filings. He noted that the new e-proxy rules go into effect soon and warned that the SEC will be relentless in enforcing the plain English mandate of the rules. He added that the staff is being more flexible with the new executive compensation disclosure rules as people adjust, but will become more strict in the coming year.

Cox reported that the staff is already seeing examples of "overlawyering" in the executive compensation sections of company proxy statements. Some companies are submitting 30 to 40 pages of executive compensation disclosure, he said, including columns in the summary compensation tables when there is nothing to report. This is an example of what the SEC is trying to stamp out, he said.

In order to promote simplification, Cox said the staff is going to tag the executive compensation data provided by several hundred of the largest public companies using XBRL. An interactive Web tool will be available on the SEC's Web site to permit users to view the information and to do industry comparisons or compensation analysis. The information should be available in June.

Cox also discussed the role of lawyers in protecting investors. He said the recent stock option backdating cases raised questions about the role of the lawyers. Unfortunately, in some cases, the answer was troubling, according to Cox. He cited a number of cases in which lawyers were involved in the fraudulent backdating schemes.

While the number of enforcement cases against lawyers has increased over the past few years, Cox said they remain relatively infrequent. He believes that lawyers are critical partners in the SEC's mission. In a significant number of the backdating investigations, Cox noted that the companies self-reported the backdating practices as the result of sound legal counsel. Most of the companies undertook extensive internal investigations, he said, again with the guidance of counsel.

Cox said the vast majority of corporate counsels uphold their legal, ethical and fiduciary responsibilities to investors. Lawyers have a vitally important role to play in the markets, he said, and he urged the profession to keep in mind that investors are depending on them.

Jacquelyn Lumb