But they may also want to start preparing their top executives for the implications of having that compensation disclosed.
That was the advice that David Kasiarz, vice president of compensation benefits and risk management at the Pepsi Bottling Group, gave to attendees of the Conference Board’s Executive Compensation Conference in New York late last month.
Pepsi Bottling Group has used tally sheets to disclose its executive compensation in its proxy statements for the past few years, viewing it as a best practice, Kasiarz said. As part of that, Kasiarz and Pepsi Bottling Group’s head of human resources meet often with executives named in proxy statements to prepare them for what is going to be disclosed to the board and what eventually will appear in the proxy.
"Companies should provide executives with a thorough understanding of what's to be printed and the implications of that," Kasiarz told conference attendees. "It's the softer and necessary side of HR."
It's also a sensitive area for some of those highly compensated executives. People often consider financial matters the most private part of their lives. It can be a shock to learn that such information can easily be found in an Internet search of Securities and Exchange Commission filings.
Kasiarz advised organizations that they should explain to new executives the ramifications of appearing in the proxy. "Tell them, 'Your neighbors are going to see it, your in-laws are going to see it, and financial planners are going to start calling you,' " he says. "It's now out there for all to see."
Preparing executives for what will follow once their entire compensation is disclosed is more critical than ever in the wake of the new rules, says Mark Reilly, a partner at 3C-Compensation Consulting Consortium in Chicago.
"Often when the proxy goes out and the media gets ahold of it, executives are surprised at the reaction, because what’s usually printed in the proxy isn’t what they are putting in their pockets," he says.
This kind of discussion is particularly important for operating executives, who—unlike CEOs and CFOs—are not accustomed to being in the spotlight, says Alan Johnson, managing director of Johnson & Associates, a New York-based compensation consultancy. It's also crucial to talk with international executives who might not be aware of the new SEC requirements, Kasiarz says.
Few companies are having such discussions, but when they are, they have been helpful, says Jack Dolmat-Connell, a compensation consultant. His firm has conducted a few board-education sessions about the new rules, and senior executive teams have been invited to attend. Not all knew that salary and perks were about to go public.
"I think it was news to a lot of them," he says.