What should companies disclose about executive compensation?

The choice regarding the disclosure of executive compensation emphasizes the importance of transparency in corporate governance. Companies are required to provide detailed information about how executive compensation is determined, which includes the performance metrics used to evaluate executives and any potential conflicts of interest that may arise. This level of detail helps shareholders and potential investors understand not only the amount of compensation but also the rationale behind it and how it aligns with the company’s performance and goals.

In many jurisdictions, regulations such as those imposed by the Securities and Exchange Commission (SEC) in the United States mandate this type of disclosure to ensure that companies are held accountable for their executive compensation practices. By providing clarity on performance metrics and any conflicts, stakeholders can better assess whether executives are being compensated in a manner that is fair and aligned with shareholder interests.

The other options do not adequately address the principles of transparency and accountability required by law. Simply providing the names of executives fails to give any context about their compensation or the logic behind it. Keeping executive compensation confidential contradicts the goals of public accountability that regulations seek to enforce. Finally, limiting disclosure of compensation details to annual shareholder meetings does not satisfy the ongoing requirements for transparency and may not adequately inform shareholders between meetings.