In response to investor demands for more disclosure, the Securities and Exchange Commission has finally brought in rules that require US companies to come clean on the mega-sums of money they are paying out to senior executives, according to reports.



Still, the new rules have been watered down after the regulators at the Securities and Exchange Commission voted unanimously on Wednesday to jettison the so-called "katie couric rule", named after the well-paid CBS news anchor, that would have required a company to list up to three non-executive employees if they were raking in more money than executive officers named in financial statements.

The new rules also weigh in on options backdating and springloading but the new rules apply only to the disclosure, not to questions of whether it's right or wrong, reports CFO.com. Hardly surprising given the comments from SEC commissioner Paul Atkins only two weeks ago in defence of options and springloading.

But the big question remains: will more sunlight will stop companies paying excessive amounts?

Don't hold your breath, says Forbes:

"The SEC has mandated greater pay disclosure before, with mixed success. In 1992, in the midst of another wave of furor over executive pay, the SEC passed new rules designed to make compensation information easier to find. Previously, companies presented almost all pay information in paragraph form. The 1992 rules required companies to put most pay information in one easy-to-read table.

"That didn't induce companies to keep pay low, says Mark Borges, a principal with Mercer Human Resources Consulting. Borges blogs about executive pay for CompensationStandards.com. "To the extent that the SEC thought by disclosing high pay levels it would influence behavior, it didn't seem to really have that impact," Borges says.
"As more data are disclosed, executives learn what their colleagues are really making. And compensation consultants, who advise boards on executive pay, can use the extra data to argue that CEOs should be making more money. In other words, a rising tide lifts all yachts."

Whatever the amount of sunlight, there is still likely to be a gap between pay and performance, the kind identified by Bloomberg's Graef Crystal after conducting sets of regression analysis.

No, the problem is not so much about the amount of moolah. It's about whether the company is aligning incentives and rewards. And more disclosure, however commendable, will not necessarily solve the problem. It would only work if investors use that information to make the companies that they own more accountable.