SEC's "Katie Couric" salary clause draws fire
By Karey Wutkowski
1 hour, 45 minutes ago
Hollywood doesn't blink at paying top dollar for the right actor in a movie deal, but a federal proposal for media companies to reveal their stars' salaries has studios crying "cut!"
CBS Corp., Walt Disney Co. and Viacom Inc. are among the media companies asking the Securities and Exchange Commission to drop a proposal that would require them to tell the world how much they pay their top-earning non-executives such as actors and TV news anchors.
The entertainment industry is abuzz over the so-called "Katie Couric" clause in a broad SEC plan for publicly traded companies to give shareholders more information about multimillion-dollar salaries. The designation comes from "Today" show co-host Couric, who is leaving NBC at the end of May to join CBS as anchor and managing editor of "The CBS Evening News With Katie Couric" for a reported salary of $15 million over five years.
The SEC proposal -- aimed mainly at prying loose more information on the pay of top corporate officers -- also would force companies to disclose salary figures for up to three workers whose compensation exceeds that of its top executives.
Companies protesting the SEC plan, which also include DreamWorks Animation SKG Inc., and News Corp., insist that the salary structure for high-paid talent is too complex and irrelevant to shareholders. The new rule also might scare away high-profile individuals who prefer to keep their financial terms private, the companies say.
The SEC hopes to unveil a final version of its overall executive compensation disclosure measure by early September, in time for companies to begin following it in early 2007.
Whether the clause opposed by Hollywood remains in the measure is now being debated within the agency.
An SEC official acknowledged that the Katie Couric clause is a key point of contention in the SEC's wide-ranging proposal.
"It's the regulation people don't seem to like," said the official, speaking on condition of anonymity.
"We're taking these criticisms very much to heart," said SEC Commissioner Annette Nazareth. "We have certainly more thinking to do and fine-tuning to do before we go out with a final rule."
The SEC proposal said the Katie Couric clause would give shareholders "information about the use of corporate assets to compensate extremely highly paid employees in a company."
While the loudest protests are coming from the entertainment industry, other companies oppose it as well.
Kellogg Co., the world's largest maker of breakfast cereal, told the SEC the plan would give rival companies crucial salary information.
Disclosure of the salary of a highly paid non-executive like a salesperson "could cause employee morale issues and provide our competitors with sensitive information that could be used to solicit the employment of our salespeople," it said.
Media companies are using the same argument.
"The disclosure requirement could have the effect that producers, talent and other individuals would prefer not to be employed by publicly held motion picture companies at all," said Linda Rappaport and George Spera, of Shearman & Sterling LLP, who wrote the SEC on behalf of several movie studios.
Hollywood studios would not be required to name their top non-executive earners under the proposal, but they said the identities would be easy enough to figure out.
Dreamworks CEO Jeffrey Katzenberg also complained in a letter to the SEC that stars' salaries have less value to shareholders because there is less conflict of interest when negotiating those amounts than in the case of executives' salaries, which are set by members of the board of directors.
Katzenberg's comments echo those of SEC Chairman Christopher Cox who said in a March speech that people generally do not "begrudge athletes and the Hollywood glitterati their outrageously high salaries."
Cox said investors need to know more about executives' salaries because they have too many ties to companies' compensation committees.
"We're implicitly more confident that the salaries of quarterbacks, movie stars, and race car drivers are determined by the market," Cox said.