A clearer list of pay and perks

Investors will soon have a new scorecard designed to lay out in plain English just how much pay and perks are being lavished on top executives at public companies.

If the goals of federal regulators are met, you will not need an M.B.A. to decipher the numbers.

The new disclosures, in annual reports and proxy statements that will begin arriving in investors' mailboxes this month, will come closer than ever to a full accounting of total compensation for companies' top two executives and the next three highest-paid executives.

"The SEC, in a very short amount of time for a regulator, has pushed through very sweeping pay disclosures that, for the first time, will give investors a very clear picture of CEO pay," said Amy Borrus, deputy director of the Council of Institutional Investors. "The big picture is a very big win for investors."

Investor anger over executive pay has spread from union activists to buttoned-down mutual fund trustees. The AFL-CIO singled out the Home Depot Inc.'s former chief executive officer, Robert Nardelli, for loud criticism of his pay package. But almost all mutual funds in the $308.1 billion T. Rowe Price Group Inc. more quietly withheld their votes for the majority of Home Depot's 11 directors at the company's May 2006 annual meeting.

On Jan. 3, Nardelli resigned abruptly - with a severance package worth roughly $210 million.

Investors wondering whether executives at their companies are getting similarly stratospheric pay have always been able to look for evidence in companies' annual reports and proxies. But key parts of the information often were buried in footnotes.

Here is what is new: For any fiscal year ended after Dec. 15, a company's financial report must contain total figures that add up executives' annual salary, bonus, stock awards, stock option awards, other "incentive" compensation, changes in the value of the pension, and all other compensation.

The tallies were required by the Securities and Exchange Commission in July as part of its biggest overhaul of executive-pay disclosure since 1992.

"In our view, this is a step in the right direction; however, in some respects, it still doesn't go far enough," said David Zion, an accounting analyst at Credit Suisse, the big investment firm.

Shareholder advocates say the compensation tallies, likely to be the most scrutinized parts of the financial reports, are missing some important components of pay, such as the amount of dividends paid on restricted stock that has not yet vested.

"We're talking about, in some cases, millions," said Brian T. Foley, an independent executive-compensation consultant based in White Plains, N.Y.

Besides the tallies, the other telling section could be a new compensation discussion and analysis, which will require the company to answer questions such as: What are the objectives of the company's compensation programs? What is the compensation program designed to reward?

Another addition: details of the pay an executive stands to get under "change of control agreements" - arrangements put in place in case the company is sold. But they will not appear in the total pay tables; investors will have to read deeper in the filing to find them.

The requirements also include disclosure of the dating of stock option grants to executives, including whether the company "backdates" options. Federal regulators are investigating more than 100 companies that backdated options, a practice that increases their value to the executives.

Advocates are unhappy with one change the SEC made late last month on options after intensive lobbying from the U.S. Chamber of Commerce and other business interests.

Under the rules as they were initially adopted in July, the full amount of an option award to an executive had to be listed for the year. So, if an executive received options valued at $10 million, the company would have to record that $10 million in its compensation table.

After the December change, companies can list a smaller amount for the first year, spreading the remainder over later years.

The options' full value will still be in company filings, just not in the summary compensation tables, Borrus, the investor-council executive, said.

"We are disappointed by this last-minute change on the disclosure of options," she said. "We think it's a step back for investors."