Consumer Federation of California

Since 2002, California has imposed its own disclosure requirements on publicly traded corporations incorporated in or qualified to transact intrastate business in California.  A subject corporation is currently required to disclose, among other things, the compensation for the most recent fiscal year paid to each member of the board of directors and paid to each of the five most highly compensated executive officers of the corporation who are not members of the board of directors, including the number of shares issued, options for shares granted, and similar equity-based compensation granted to each of those persons. Corporations Code Sections 1502.1(a)(4) and 2117.1(a)(4). These disclosures are made in statements of information filed with the California Secretary of State’s office. The Secretary of State provides an on-line search tool to locate filings by these corporations.

Of course, these disclosures are neither as comprehensive nor as current as those available on the Securities and Exchange Commission’s EDGAR system.  As I’ve said, California’s disclosure requirements are far more likely to mislead than to inform the public.

Despite the manifest shortcomings of California’s disclosure regime, Senator Mark Leno has introduced a bill, SB 1208, that would require these corporations to disclose:

The total compensation for the most recent fiscal year of the publicly traded corporation paid to each of the five persons retired from the corporation who received from the corporation the highest amounts of total compensation that the corporation paid to retirees, and the name of each of those retirees.

Senator Leno claims that if SB 1208 is enacted, it would be ‘the first attempt by any state to require disclosure of the actual compensation awarded to retirees’.  Item 402 of Regulation S-K does require some disclosure about pension benefits and deferred compensation but this relates to the current named executive officers.  SB 1208, in contrast, requires disclosure with respect to individuals who have retired. 

The bill would also define ‘total compensation’ and require disclosure of the total compensation paid to each member of the board of directors, the principal executive officer, the principal financial officer, and the three most highly compensated executive officers, other than the principal executive officer and principal financial officer, of the corporation who are not members of the board of directors.

According to this analysis prepared for the Senate Judiciary Committee, SB 1208 is supported by Alliance of Californians for Community Empowerment; California Labor Federation; California Nurses Association; California Professional Firefighters; Consumer Federation of California;  and California School Employees Association.  No opposition was registered.  I’ve been informed by Senator Leno’s office that SB 1208 passed out of the Senate Judiciary Committee yesterday.