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Avoiding Pay Pitfalls

The SEC pushes companies to analyze whether their compensation plans actually promote behavior that creates risk.

By Susan Kelly | Updated on February 01, 2010

The Securities and Exchange Commission saddled companies with a new chore late last year when it announced regulations requiring them to disclose risks associated with compensation plans in their proxies. The timing of the announcement gave calendar-year companies just a few months to put together the disclosures. And the process could push some companies into new territory, since risk hasn’t been high on the list of considerations when they put together pay plans.

“I just have not run into anyone yet who says they do a thorough assessment of compensation policies and practices as they relate to risk exposure,” says Mat Allen, who leads the ERM services and solutions practice at Marsh Risk Consulting.

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