WASHINGTON — Federal regulators took a first step Tuesday toward forcing companies to shed more light on executive pay -- but an unintended result could be even richer rewards for corporate chieftains, some experts say.
The proposal by the Securities and Exchange Commission would require companies to more clearly disclose salary, stock grants and perks that can now be obscured. It follows a rising tide of criticism of high and hidden compensation in the executive suite.
But stricter reporting rules also would give companies a clearer window into the pay practices of rivals -- information that executives could use to negotiate hefty raises for themselves, compensation experts noted.
"We have a good probability that pay will actually increase based on increased disclosure," said Dan Wetzel, a vice president with compensation consulting firm Pearl Meyer & Partners in Los Angeles. "To keep up with the Joneses, there will be some increases that are required."
Such views may find backing in recent history. The SEC's last effort to strengthen pay disclosures in 1992 was followed by a wave of astronomical executive wage hikes, corporate observers say.
"We have to be extremely careful that the changes don't promote increasing executive compensation through disclosure," said Cynthia Krus, an attorney and corporate governance specialist.
SEC Chairman Christopher Cox noted that the initiative was not intended to influence how much companies pay executives. Instead, the idea was to update the rules to reflect compensation trends not envisioned in 1992.
"Our purpose here today is to help investors keep an eye on how much of their money is being paid to the top executives who work for them," Cox said. "It is about wage clarity, not wage controls."
In an era of heightened corporate scrutiny, some believe that clarity alone could make a difference.
"There's no guarantee it will put the brakes on executive pay," acknowledged Carol Bowie, director of governance research at the Investor Responsibility Research Center in Washington. But, she added, "it will give investors better tools by which to gauge whether the managers of their companies are actually earning the pay they receive."
On a 5-0 vote, the SEC agreed to put the measure out for a 60-day public comment period, which will begin this month. If the rules are approved, officials expect them to be in place when annual proxy statements are sent to shareholders in 2007.
