Katie Couric Clause

What Is the Katie Couric Clause?

The Katie Couric Clause was a shoptalk term to allude to a controversial rule that the Securities and Exchange Commission (SEC) considered carrying out in 2006, referred to officially as the Executive Compensation and Related Party Disclosure clause.

The clause, which was eventually not adopted, would have expanded on existing executive compensation rules, expecting companies to disclose the pay of up to three of the highest-paid non-executive employees at a company. The existing laws that the clause would have expanded upon expect firms to report the salaries of CEOs, CFOs, and other high-positioning executive officers of public companies.

The Katie Couric Clause was supposed because it would have likely forced CBS to disclose the pay of Katie Couric, who became CBS's highest-paid newscaster in April 2006, with a reported salary of US $15 million more than five years. Her deal with CBS followed a 15-year tenure with NBC where she co-facilitated "The Today Show."

Grasping Katie Couric Clause

Both major media companies, such as CBS, NBC, and the Walt Disney Co., and large Wall Street firms went against the SEC's controversial proposal. Media companies and financial services firms were believed to be the types of firms most affected by the proposal since they frequently pay high salaries for employees who aren't C-Suite executives.

Such firms are frequently reluctant to disclose point by point executive compensation data because they consider it to be an intrusion of employees' privacy, and furthermore uncover proprietary data that would empower competitors to poach their employees. While the employees being referred to wouldn't need to be named, many accept that it wouldn't be difficult to attach a name to the subtleties.

Current SEC rules demand that salaries of the main five executives in publicly traded companies be disclosed. Assuming the Katie Couric clause had been adopted, companies would have needed to disclose total compensation of up to three non-executive employees whose pay exceeds that of any of its main five managers. Allies of this proposal say this rule would create greater transparency and give investors increased access to data, which ought to bring about better-informed decisions.

Current SEC Rules on Executive Compensation

The Katie Couric Rule was not adopted by the SEC in 2006, yet new regulations concerning the disclosure of data concerning executive compensation were required because of the 2010 [Dodd-Frank](/dodd-frank-financial-administrative reform-bill) financial reform legislation, which was enacted after the fallout from the 2008 credit crisis. Dodd-Frank contained executive compensation-related provisions. While not those provisions have been approved by the SEC starting around 2021, there are a couple of key ones that have been put in place.

For instance, the SEC adopted new rules in 2015 expecting companies to disclose the ratio of pay between its chief executive officer (CEO) and its median employee. Likewise under current rules, a company must disclose the amount and type of compensation paid to its main five executives, specifically, its CEO, chief financial officer, and the three other executive officers who are the most highly compensated.

Different changes in SEC reporting requirements mean companies must include an "Executive Compensation Discussion and Analysis" section alongside pay documentation in every single SEC structure. The section must include a clarification of how the compensation was determined and what it includes.

Special Considerations

Allies of executive compensation rules say they are necessary for corporate transparency, and give investors important data about a corporation's structure. In terms of the pay ratio rule, a high ratio of CEO to median worker pay might recommend that the board is overpaying for its executives. Disclosing the pay of the main five executives is viewed as likewise giving clarity about whether the board is overpaying its executive and utilizing its money shrewdly.

The CFA Institute, a global association of investment experts, has advocated for an increase in disclosure of high-level executive compensation practices at companies as well as pay structures determined by performance-based metrics.

Yet, numerous large corporations object to the series of provisions, contending it will negatively impact their hiring practices and encourage firms to outsource their low-paying labor to services companies.

For instance, soon after the entry of Dodd-Frank in 2010, the Securities Industry and Financial Markets Association (SIFMA), with individuals among the largest representative dealers, sent a notice to the Federal Deposit Insurance Corporation (FDIC) contradicting proposed bank executive compensation rules, contending that any such regulations would limit its individuals' ability to attract and hire the ability required.

Highlights

• Proposed in 2006, the rule would have required companies to acknowledge the pay of up to three of the highest-paid employees at a company past the executive suite publicly.
• Different regulations introduced in subsequent years, including Dodd-Frank in 2010, resolved the issue of executive compensation, necessitating greater transparency in terms of corporate spending.
• The Katie Couric Clause was a shoptalk term used to describe a proposed Securities and Exchange Commission rule in regards to the disclosure of executive compensation and the compensation of other select employees.
• The rule received blowback from major media companies and Wall Street firms and was at last not adopted.
• The rule would have meant that CBS would have needed to disclose the salary for Couric, at the time CBS's highest-paid newscaster.
• The rule was proposed as an extension of as of now existent executive compensation laws, which require disclosure of the compensation for CEOs and other key executives.