From: Ann Davidson
SEC Chairman Christopher Cox
Dear [ SEC Commissioners ],
I am writing to urge the Securities and Exchange Commission to act on its proposed rule on executive compensation disclosure.
As an investor, I find it very difficult to evaluate a company's true performance because of the accounting gimmicks used, including those used for executive compensation.
Too often executives are richly rewarded even when their companies' performance is below par. Without better disclosure, shareholders, employees and the general public cannot evaluate whether executive pay packages are unjustly enriching executives at shareholder cost or providing fair compensation. I also find it disturbing that top executives are allowed to dispose of company stock included in their compensation packages that is losing value, while their employees are often locked into pension plans holding those same devalued shares, as happened in the Enron case. Investors, of course, also lose big in such cases. The way these compensation packages are rigged, no matter whether the stock goes up or down, top executives make out while their employees and the investing public take the loss.
The newly proposed rules will make this crucial information more accessible to shareholders and the public. The new requirements to disclose total compensation figures, pensions and detailed compensation breakdowns will make it clear exactly how much top executives are earning and why.
I believe that CEO pay should be set by independent directors. Under the proposed rule, a director could secretly do $120,000 in business with a company, an amount that is more than four times the average worker's annual pay of $27,460. Shareholders should be told if directors have potential conflicts of interest, no matter what the amount.
I also urge the SEC to require that companies disclose pay-for-performance data. In order for investors to understand how pay and performance match up, companies need to explain more clearly what level of performance is necessary for a particular level of pay. I urge the SEC to require companies to disclose both the performance criteria and the performance targets they use when setting executive pay.