SEC Rules to Expose Executive Pay

Neither practice is necessarily illegal. In the case of backdating, for instance, the SEC and other federal regulators are investigating whether companies properly disclosed that the options had been backdated and if the companies had properly accounted for them.

The new rules better articulate companies' disclosure duties when it comes to the timing and terms of options grants.

Under the new provisions, companies would have to disclose if they have any "program, plan or practice" to time the release of material information around stock grants and the role of company executives and directors in establishing the program.

Companies would have to make similar disclosures about whether they have a program to use a date other than the grant date for determining the exercise price of options.

Companies will also have to discuss in their proxy disclosures why they choose particular dates to grant options and, if they backdate them or use a price other than that of the grant date for the exercise price, why they did so.

In disclosing the terms of compensation agreements with new executives or new contracts with existing executives, companies will begin having to comply with the new rules within 60 days of the date of publication in the Federal Register.

Most other companies will have to comply with the rules beginning with any annual reports or proxy statements they file after December 15.