Anger over executive pay, particularly at banks, is high. That may have been one reason the Securities and Exchange Commission moved to improve the rules this year, but it was something that would have needed doing even if business leaders were widely deemed to be geniuses. Shareholders need good information, and the disclosures required by the S.E.C. before made the figures unnecessarily confusing.
There is still one area where companies could play games to make their bosses look less well paid than they really are. That is in the area of performance-based awards, where the payout will depend on how well the executive or the company performs relative to undisclosed goals. A company that wants to do so may be able to obscure just how likely a rich reward is for an executive.
Still, the information will be better than ever before. A particularly important change will make it more likely for shareholders to learn when one executive is given a huge options award. In the past, it was sometimes possible for a company to leave that out of disclosures, since the impact of the grant was spread over several years. Companies could make someone the highest-paid executive in a company for a year but not disclose that to shareholders.
Perhaps the most impressive fact is that the new information will be available this year. Mary L. Schapiro, the S.E.C. chairwoman, decided to fight her way through bureaucratic delays to get the new rule out just in time for this year’s proxy season. Under normal S.E.C. procedures, there is little doubt the changes would have been effective a year from now, not this year.
In less than a year, Ms. Schapiro has established a reputation for careful but determined reform, of the commission itself and of the markets it regulates.
She took over a commission whose final Bush-era chairman, Christopher Cox, remains an enigma. Evidently brought in with a mandate to keep things quiet, he did that by doing little unless everyone agreed. By giving a veto to Paul Atkins, a member of the S.E.C. who was basically against regulating Wall Street, he ensured that nothing good would happen.
Enforcement slowed and the morale of the S.E.C.’s staff plunged. The collapses of Bear Stearns and Lehman Brothers showed that S.E.C. inspections had been close to useless. In the final blow, the exposure of Bernard Madoff’s Ponzi scheme made the commission’s enforcement staff appear inept at best. There was talk that the S.E.C. might not survive a regulatory restructuring.