Better reporting on executive pay? Yes, but ...

NEW YORK (CNNMoney.com) -- Here's what you'll learn during the 2007 proxy season: A lot more than ever about what corporate executives are really paid.

Here's what you won't learn: As much as you might have without trying.

New SEC rules approved in July were intended to make it easier to judge compensation for a company's CEO, CFO and at least three of its most highly paid executives.

But a recent amendment to those rules, detailed in a surprise announcement by the SEC on the eve of Christmas weekend, falls short of that goal, said some compensation experts and shareholder advocates.

"It's a step back. It's disclosure, but not what we hoped or thought we would get," said Amy Borrus, deputy director of the Council of Institutional Investors.

Specifically, the CII and others object to the part of the amendment that changes the way a company must report an executive's stock option grants.

Under the July rules, a company would have had to report the total value of a grant made in a given year - say, $10 million of stock options to vest in equal portions over 5 years. But the amendment calls for a company to report only the portion of that grant that vests in the year to which the proxy applies.

So, in this example, instead of $10 million in options, no more than $2 million would be reported.

Neither figure indicates accurately what the executive is actually going to be paid. The $10 million is the value of the options as of the grant date and the $2 million is the earnings charge the company must take for the shares that vest that year. What the executive eventually pockets depends on the stock price if and when he exercises his vested options.

But what is lost under the amended rules, shareholder advocates and compensation experts say, is a clear indication of a company board's intent regarding an executive's target pay.

"They decide pay based on the grant-date value of an award," said CPA Mike Kesner, principal in charge of executive compensation at Deloitte Consulting, who also serves as an independent adviser to several Fortune 500 compensation committees.

By just reporting the vested portion of a grant, "it gives you no idea as to how generous (the compensation committee) was planning to be," Borrus said.

What's more, Kesner said, by the time the accounting costs of a grant are reported in the proxy, "a lot of the pay decisions are old and cold. You're reporting stale information."

It also means that the so-called top 5 highest paid employees may not reflect reality because of varying vesting schedules.

It's not as if investors can't go hunting for the current estimated value of an options grant since the total number of shares granted and the grant-date share price will still be reported. But the July rules had meant to clearly indicate pay in a "summary compensation" table.

Now "you'll have to make the extra effort," Borrus said.

Or, as shareholders have in the past, rely on corporate watchdogs like The Corporate Library and CII to make the effort for them.

Shareholder advocates still believe the SEC's disclosure rules today are far better than they were before the agency passed its new rules last July.

But Kesner and Paul Hodgson, a senior reasearch associate at The Corporate Library, both said the SEC should have gone further, requiring two types of summary compensation tables: One would reflect an executive's targeted pay for a year, including the total grant-date value of options given that year.

And one would reflect what an executive actually pockets in cash in a given year, including the value of his salary, bonus, cashed-in options, perks and money paid toward his retirement plans, etc.

Said Hodgson, "I want to know how much they got when they exercised."

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