SEC chairman touts disclosures in CEO pay debate

By Martha Graybow

WASHINGTON (Reuters) - New rules aimed at streamlining executive pay disclosure should help investors make up their own minds about the hot-button issue of CEO pay, the chief U.S. securities regulator told Reuters on Monday.

Christopher Cox, chairman of the Securities and Exchange Commission, said pay disclosure rules that go into effect this year should help "the market function more efficiently." The new disclosures, approved by the SEC last year, require companies to provide more information in proxy statements on top executives' total pay and perquisites.

"Men and women who are required to undress in public tend to pay closer attention to their figures," Cox said, speaking at the Reuters Regulation Summit in Washington,

Soaring executive pay has riled investors and politicians, with people such as Massachusetts Democrat Barney Frank, the new head of the U.S. House Financial Services Committee, saying that executive compensation has run amok.

Recently, big exit packages for two prominent executives, ex-Pfizer (PFE.N: Quote, Profile, Research, Stock Buzz) chief Hank McKinnell and former Home Depot (HD.N: Quote, Profile, Research, Stock Buzz) CEO Robert Nardelli, have enraged investor watchdogs.

Cox said it would be easy to find instances in which CEOs are probably paid too much, but that he also thinks some corporate chiefs might not be earning as much as they could if they were to look for jobs at other companies.

"It's very easy to say that in the United States of America, with our 300 million people and our thousands of public companies, there are ample examples of overpaid CEOs," Cox said. "It's probably equally true that there are executives in America who are capable of earning more if they were only to jump ship."

Unlike some of his outspoken predecessors such as William Donaldson and Arthur Levitt, Cox has been consistently measured on issues such as executive pay or shareholder rights.

In a March 2005 speech, for example, then-SEC Chairman Donaldson urged boards to rein in CEO pay and said that he was seeing a "shift away from the Imperial CEO and toward more responsibility for directors." Donaldson also said that boards should base pay on performance, "not the pressure to meet an artificial standard informed by outside consultants" hired to give out advice on executive pay levels.

Under the SEC's new pay disclosure rule, companies must include in their annual proxies a single number that combines salary, bonus, perks and other compensation awarded to each top executive in a given year. A furor erupted late last month from shareholder activists who said the SEC was trying to backpedal on stock options disclosures, but Cox said Monday that companies must still declare the value of these grants.

Cox, a former Republican congressman from California and a strong advocate of free markets, said that compensation is often contentious -- be it the salaries of CEOs, movie stars or basketball players.

"There is a market for executives just as for other talent," he said. "It is in the interest of the shareholders to get the very best possible talent at the very lowest possible price."