Given the amount of controversy among shareholders about executive compensation packages and the concern expressed by regulators, most companies have long known that new regulations were coming and have been acting to eliminate potential conflicts, Amy Seidel of Faegre Baker Daniels told Treasury & Risk in the article, "More Disclosure on Compensation."
"These new rules have been a long time in the making, and this also tracks what was done with respect to insuring the independence of audits," Seidel said. The Securities and Exchange Commission recently mandated that U.S. stock exchanges propose new listing standards requiring public companies to disclose any conflicts of interest involving their compensation consultants in their proxy statements.
"We've seen a lot of cleaning up of the compensation consulting business," Seidel told Treasury & Risk. Most of the largest compensation consultants that were units of bigger organizations, which might have posed conflicts because of the work the parent did for the same corporate clients, have already been spun off as independent companies, she added.
The new rules being developed by the exchanges for their listed companies are "about disclosure, not about prohibiting using specific consultancies," Seidel explained. "There's a finite number of consultancies and so actually the prospect of various potential conflicts of interest is quite significant."