SEC Commissioner and MIT Senior Lecturer Call on SEC to Update Executive Pay Disclosures

SEC Commissioner Robert J. Jackson Jr. and MIT Senior Lecturer Bob Pozen called on the SEC to make executive compensation practices more transparent to shareholders.

In an WSJ op-ed, Mr. Jackson and Mr. Pozen argued that shareholders deserve more information on executive compensation payment practices as many executives are being paid to hit "adjusted," non-Generally Accepted Accounting Principles ("non-GAAP") targets. They noted that there are some "good reasons" to use adjusted earnings to evaluate corporate performance, such as when one-time charges mask the "health" of a business. However, they also said that those non-GAAP adjustments are often significant and are, therefore, important to be communicated to investors.

Mr. Jackson and Mr. Pozen urged the SEC to update disclosure requirements to (i) force companies to report on why they are using non-GAAP measures when making decisions regarding executive compensation and (ii) quantify any differences between adjusted criteria and GAAP.