January 19, 2006
SEC Proposed Rules on Executive Compensation
The business community has seemingly welcome the new SEC rules on executive compensation. Public statements by business leaders are positive and some companies brag that they have some of the rules in place now. Other companies say they will implement the rules now, before they are formally adopted. The only worry seems to be over the method of valuing executive options. Some worry that they could be "overvalued" by some methods. The question remains, if business leaders are so positive in public about the rule changes, why did it take the SEC so long to put these changes in place? What back room lobbying held them up? And why do more companies not voluntarily have more accurate disclosure systems in place? The obvious answer -- agency problems: executives have long resisted accurate disclosure of their pay packages in their own interest -- in private-- as long as they could; when the matter is the subject of public discussion, executives cannot resist without appearing selfish and greedy.
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