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On December 22, 2006, the Securities and Exchange Commission changed the way equity compensation awards are presented in the new compensation tables it adopted earlier in the year. The revisions will be effective for the upcoming 2007 proxy season for calendar year reporting companies. They will affect the determination of a reporting company's named executive officers and the total compensation reported for those executives.

The revisions to Item 402 of Regulation S-K and Regulation S-B change the way stock awards and option awards are reported in the Summary Compensation Table and the Director Compensation Table. The amendments also revise the Grants of Plan-Based Awards Table for reporting companies subject to Regulation S-K.

Changes to Summary Compensation and Director Compensation Tables

The comprehensive amendments made by the SEC to the Summary Compensation Table and the adoption of the Director Compensation Table earlier in the year required a presentation in the Stock Awards and Option Awards columns of the full dollar value of an executive's equity awards granted during the year based upon the grant date fair value under FAS 123R. Under the new revisions, the amount to be reported is based on the compensation cost recognized for financial statement purposes under FAS 123R for awards granted both during the year and in prior years. Under FAS 123R, the compensation cost of an award is initially measured based on the grant date fair value of the award, but is generally recognized for financial reporting purposes over the period in which service must be provided for the award (generally the vesting period).

This change makes the presentation of equity based compensation consistent with non-equity based compensation, which is reported when earned. This change also makes the tabular presentation of equity compensation awards more consistent with the financial statement recognition of those awards. However, since the compensation cost to be disclosed in the tables will not include the adjustment for estimated forfeitures required by FAS 123R, there will be a difference. In addition, since the new compensation disclosures must be calculated using the modified prospective transition method under FAS 123R, there will also be a difference for companies that have not used that method under FAS 123R for financial reporting purposes.

The change can have an impact on the determination of the named executive officers for whom compensation information must be provided under Item 402 of Regulation S-K and Regulation S-B. More significantly, it will have an effect on the total compensation reported for the named executive officers.

An instruction to the Salary and Bonus columns of the Summary Compensation Table has also been revised to make it clear that salary or bonus foregone at the election of an executive in favor of receiving non-cash compensation must still be reported in those columns, with an appropriate footnote disclosing the receipt of the non-cash compensation and, if appropriate, referring to the Grants of Plan-Based Awards Table where the non-cash compensation is reported.

Grants of Plan-Based Awards Table Changes

The full grant date fair value of an award will now be reported in the Grants of Plan-Based Awards Table and in a footnote to the Director Compensation Table. A new  column has been added to the Grants of  Plan-Based Awards Table to show the full grant date fair value of each equity award, on an award-by award basis, computed in accordance with FAS 123R. The incremental fair value of repriced options, stock appreciation rights and similar option-like instruments must also be included in this column. The same type of information for directors is to be included in a footnote to the Director Compensation Table. 

The new revisions were adopted as interim final rules so they could be in effect for the 2007 proxy season. The full SEC release can be found at