In Focus

CII Asks SEC to Require Clear Disclosure on CEO Pay Targets

Growing numbers of U.S. public companies are tying executive pay to “adjusted” earnings figures that often overstate performance as measured by generally accepted accounting principles (GAAP), the standard for financial statements filed with the SEC. And many companies are not clear on what those adjustments are, leading to investor confusion about the link of pay to performance. Investors deserve more transparency in proxy statements about the measures corporate boards use to determine incentive pay for executives. That is why CII filed a petition to the SEC asking the agency to require public companies to reconcile any “adjusted” earnings measures they use to GAAP figures in the proxy statement’s Compensation Discussion & Analysis section, and to explain their rationale for using adjusted measures in setting executive pay. “Adjusted earnings and other adjusted measures should not be used to engineer excessive payouts,” CII Executive Director Ken Bertsch said in a statement.

For background on the petition, read this CFO Magazine story and listen to a short CII podcast interview with Robert Pozen here.