Will 2006 be remembered as the year that widespread executive compensation reforms took hold? Final rules have yet to be set, but the current proposals represent the biggest overhaul by the Securities and Exchange Commission (SEC) in 14 years. Companies, of course, aren't being told how they should compensate senior executives, but the approach of letting more sunlight into the process of determining pay packages, and getting rid of much of the overly lawyered boilerplate, may be the regulators' best weapons. As SEC chairman Christopher Cox put it when he announced the proposed measures, "Our purpose ?? 1/2 is to help investors keep an eye on how much of their money is being paid to the top executives who work for them."

More certain is the fact that the final rules will add to the responsibilities of CFOs and put more emphasis on their own pay. Under the proposals, all public companies would be required to furnish a total compensation figure–as well as details including stock- and options-based rewards, perquisites, pensions and post-employment plans–for their CEO, CFO, the three other highest-paid executive officers and all directors. In addition, a new Compensation Discussion and Analysis (CD&A) section would replace the current Compensation Committee Report and Performance Graph. The CD&A would have to be filed with regulators, thereby requiring a sign-off certification by the CEO and CFO.

Even though this is likely to add to the burdens of already stretched CFOs, CFOs in general support the changes, which are seen as a solid advance for shareholder protection. According to a recent Financial Executives International (FEI) survey of 201 CFOs, 71% voiced support for the overhaul. "CFOs are extremely aware of how incentive plans are designed and implemented and how company performance translates into compensation payments," says Paul Hodgson, senior research associate at the Corporate Library. Although it will remain the job of a compensation committee to make final pay determinations, no consultant or even board member knows a company's culture or business like the CFO and CEO, and knowing that their input has been included should be a positive sign for shareholders. "To have their imprimaturs on it is actually a very valuable thing," says Hodgson.