Via Broc :
Bosses are likely to be nervous about comments [Christopher Cox] made shortly after becoming SEC chairman that investors had to have sufficient information about executive pay to be able to "discipline" cases of "apparent excess".
In a speech to business leaders in New York this month, he sought to reassure people the SEC did not want to "interfere in salary decisions" or to "cap salaries".
The SEC has instead been studying what additional information should be provided to investors about executive pay. It is considering requiring companies to make valuations of bosses' defined benefit pensions and stock options, potentially huge sources of compensation.
William Donaldson, Mr Cox's predecessor, hoped that better disclosure of executive pay would help curb examples of big compensation packages at troubled or failing companies.
Mr Cox told the FT it was the job of boards of directors to align "executive pay with executive performance", and that the SEC proposal "would not directly help with that aspect".
Good for Cox. Former SEC Chairman Donaldson's erroneous belief that the SEC has authority over the substance of executive compensation was one of the many ways in which he illegitmately sought to expand the scope of the SEC's power over corporate governance.
As I wrote in a TCS column on Donaldson,
... the SEC has no power -- none, nada, zilch -- to regulate the substance of corporate governance, including but not limited to the merits of executive compensation. As the U.S. Supreme Court has made clear, these issues are left to state corporate law. The SEC thus has no business trying to regulate -- even if only through use of the Chairmans bully pulpit -- substantive issues, such as the metrics by which boards set compensation. Second, while the SEC has authority to regulate corporate disclosures relating to executive compensation, it should be loath to do so.
