Gearing Up For the New Disclosure Requirements: SEC Issues Final Executive Compensation and Related Party Disclosure Guidance

On August 11, 2006, the SEC released the final rules relating to disclosure of executive and director compensation, related party transactions, director independence and other corporate governance matters, current reporting regarding compensation arrangements and beneficial ownership of officers and directors. Although the final rules have been adopted largely in the proposed form, the SEC did make several significant changes, such as the disclosure relating to option grant practices and revisions to the proposed requirement to disclose the compensation of up to three non-executive employees who earn in excess of any of the named executive officers. However, the overarching principle of the final rules continues to be that a company must disclose all elements of compensation.