WASHINGTON - When the Securities and Exchange Commission meets today to vote on proposed disclosure rules for executive compensation, members are likely to have noticed the strong opposition from bankers.
Amid almost universal praise from investors seeking more openness and accountability, scores of bankers have written to urge the SEC to reconsider.
John F. Grundhofer, president and chief executive officer of First Bank System, Minneapolis, called the proposal "a regulatory response to a political hot potato [that] will in the end do nothing to improve on the disclosure already available to our shareholders."
Not a Preferred Path
"I fear that the proposed rules are leading us down a path which none of us win be glad to have traveled," Mr. Grundhofer wrote.
Richard S. Brennan, general counsel of Continental Bank Corp. in Chicago, said:
"We believe the proposal represents an overreaction [to a public outcry for a regulation], is unduly complex and costly, and unnecessarily burdens the corporate governing process."
But such protests appeared to have been drowned out by endorsements from small investors and others among the 1,200 who submitted written comments since June, a near-record volume for an SEC proposal.
Bankers said they appreciated the need for clearer, more detailed information on the salaries of corporate leaders and the justification for the compensation, but they contended that the specific rules would go too far and in some cases would make the disclosed information confusing.
Concerns over Expense
Costs of compliance, which bankers see as part of an increasingly onerous "regulatory burden," "would ultimately come out of the earnings of the shareholders," warned Patrick F. Patrick, president and chief executive officer of Metropolitan Federal Savings and Loan of Seattle.
One part of the SEC proposal would require a detailed report from board compensation committees on executive salary decisions. Bankers viewed compliance with this provision as nearly impossible and warned that the disclosure could lead to divisiveness and factionalism among employees.
"A distinction exists between providing shareholders with the opportunity to question management as to its motivations and requiring management to conduct its deliberations in public," wrote Stephen E. Dietz, associate general counsel of Citicorp's Citibank unit, New York "Ignoring this distinction will have a chilling effect on ... directors' free exchange of ideas."
Tables Called Confusing
Mr. Grundhofer, referring to a required disclosure format, said, "Fourteen tables of overlapping and, in some cases, irrelevant information cannot be considered clear and concise by any reasonable person. At best, such tables will be merely confusing; at worst such tables will have the appearance of clarity while in actuality they are misleading and misrepresentative."
Joseph H. Kott, senior vice president of Midlantic Corp., Edison, N.J., said the proposal could present a particular problem in turnaround situations, where boards may grant "a multi-year employment contract with certain incentives, some of which may not necessarily be based on performance."