Amid the ongoing furor about executive pay, the Securities and Exchange Commission (SEC) recently proposed changes to what companies must disclose about top officers' pay. The changes, expected to take effect in 2010 proxies, include a consideration of risks involved in pay plans.
In the proxy report's compensation discussion and analysis, the SEC wants companies to look at whether compensation policies create incentives for employees that could add to risks. "Certainly the principle of doing a compensation risk assessment makes a lot of sense," says Don Nemerov, an executive director in Grant Thornton's compensation and benefits consulting practice. But he questions how far the requirement extends. "We need some more definition and boundaries," Nemerov says, suggesting that otherwise, "all the sudden, we'll have every compensation plan for the company in the proxy."