Hollywood CEO Paydays May Get Harder to Track as Federal Regulator Proposes Disclosure Revamp

It’s no secret that Hollywood CEO pay is often a hot-button story.

Chief execs in media, entertainment, and technology are annually among the most highly compensated people on Earth, with mid-eight-figure pay packages a common occurrence and nine-figure paydays increasingly common.

But those days might be ending soon. Not the paydays, just the disclosures, should new rules from the Securities and Exchange Commission go into effect.

The SEC on Friday proposed a revamp of its executive compensation disclosure rules, simplifying things while also changing what those disclosures will look like. The result will be that pay is disclosed for fewer executives, with only the CEO and CFO likely to be disclosed should the rule change pass (no more COO, general counsel or other C-suite pay), while the way the pay packages are disclosed shifts.

In addition, the threshold for perquisites is being raised from $10,000 to $150,000, meaning that some perks like club memberships will no longe require disclosure, and companies will get more discretion to determine if something is a perk at all, such as CEO security costs.

At the heart of the changes are simpler disclosures, with three tables: “Earned Compensation Table, Granted Compensation Table, and Status of Equity Awards Table” with a particular emphasis on salary, bonus and equity grants.

“As applied to executive compensation disclosure, a panelist at last year’s roundtable aptly analogized current Item 402 to an ice cream parlor that carries rum raisin and maple walnut; flavors desired by only a single customer,” SEC chairman Paul Adkins said in a statement about the proposed changes. “The proposed amendments would, if adopted, revise Item 402 to focus on an objective standard regarding needs of the reasonable investor, rather than on the specialized tastes of a specific investor.”

Executives, investor relations and corporate communications teams are surely cheering the move, which will result in less gargantuan numbers than previous disclosures. Some of those changes may be warranted: After all, equity may not end up vesting if certain metrics are not achieved, and a high strike price can invalidate whatever value is in some shares. Those are things that CEOs have complained about for years: The news coverage has a headline number, but their actual take-home could be lower (or much higher!) depending on the performance of the shares.

The new disclosure structure will eliminate the paper gain spikes associated with unvested equity, and likely to be closer to what an executive really takes home, though if the old model sometimes overstated thing, the new disclosure may understate things, if the stocks consistently rise.

There will also be changes to the employee-to-CEO pay ratio, which focuses it on U.S. full-time employees and could make for more favorable comparisons.

And the changes to perquisite reporting mean that things like security, parking, country club memberships and even some private jet use could no longer be disclosed, all of which would be music to CEO ears. Even if those disclosures sometimes help tell a bigger story.