More Disclosure on Compensation

New exchange standards will require companies to disclose any conflicts of interest on the part of exec comp consultants.

In a move that further weakens executives’ influence over the setting of their compensation, public companies will soon face new requirements that they disclose any conflicts of interest involving their compensation consultants in their proxy statements.

The Securities and Exchange Commission mandated that U.S. stock exchanges propose new listing standards to that effect this September, standards that are to take effect next June.

Seidel says most of the large compensation consultants that were units of bigger organizations, which might have posed conflicts because of work the parent did for the same corporate clients, have already been spun off as independent companies. “We’ve seen a lot of cleaning up of the compensation consulting business,” she says.

The new rules being developed by the exchanges for their listed companies are “about disclosure, not about prohibiting using specific consultancies,” Seidel stresses, and says there’s a good reason for this. “There’s a finite number of consultancies and so actually the prospect of various potential conflicts of interest are quite significant.”

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