The U.S. Securities and Exchange Commission started sending letters this week to a cross-section of public companies, requesting further details about how they pay their executives, an agency spokesman said on Wednesday.

The letters are part of an SEC project to determine if companies are adequately following new rules that took effect during the 2007 proxy statement season. The rules require companies to reveal more data and explanation about their executives' compensation.

SEC Chairman Christopher Cox said earlier this year that he was not satisfied with some of the initial results of how companies complied with the new rules. Cox said many of the compensation disclosures were boilerplate and suffered from overlawyering.

SEC spokesman John Nester said the review project was initiated over the summer but declined to say how many letters were being sent or to identify the companies.

The commission's new rules produce the clearest-ever disclosure of what companies are paying their executives, he said. Comment letters will help companies better explain why.

The SEC rules require companies to give a single number for an executive's pay, instead of the jumble of figures previously scattered across proxy statements.

The old system often allowed companies to obfuscate about payment and compensation packages, frequently including footnotes that referenced complicated bonus and options plans.

The new rules also require companies to explain why they chose to compensate their executives as they did.


Some shareholder advocates say that while the SEC made welcome changes, the pay information reported by some companies is still difficult to decipher.

Soaring executive pay has drawn criticism from investors and lawmakers over the past year. Massachusetts Democrat Barney Frank, the chairman of the U.S. House Financial Services Committee, characterized executive compensation as having run amok.

John White, head of the SEC's division of corporation finance, said in a speech last week that the agency's review of proxy statements was focusing on larger companies and their analyses of executive pay.

The SEC is particularly interested in how companies analyzed the different components of compensation and on change of control and termination payments, White said.

The agency is focusing on executives' performance targets, which some companies chose not to disclose based on confidential treatment standards, he said. White said the SEC would look at why those goals were withheld and if the alternative disclosures were adequate.

The review process and comment letters could result in some companies having to amend their proxy statements, White said.

But he said that most of the letters are simply asking a lot of questions and will result in a give and take of comment letters and company responses.

We appreciate that these are new disclosures and that most companies are acting in good faith to comply, White said.