SEC may tighten executive pay rules: sources

By Rachelle Younglai and Jonathan Stempel

WASHINGTON/NEW YORK (Reuters) - U.S. securities regulators are considering changing how companies are required to disclose stock options awarded to executives, people familiar with the Securities and Exchange Commission's thinking told Reuters on Tuesday.

At an SEC meeting on Wednesday, the commissioners also will propose giving investors a greater voice in setting executive pay at companies that were given taxpayer funds under the U.S. government's Troubled Asset Relief Program.

Among the possible changes is a revision to how companies value equity awards in the "summary compensation table" for top executives that they file with the commission each year.

The SEC is considering requiring companies to include the estimated value for stock options granted during the year, the people said. The sources requested anonymity because the proposal is still being crafted and may change.

The table now includes the value of option grants that vested, or became eligible to be exercised, during the year. Many compensation experts consider this an imperfect way to value options, and believe options should be valued as of the date they are granted.

A change in how companies report the value of stock options could profoundly affect the reporting of executive pay.

Citigroup Inc (C.N), for example, reported $10.8 million of compensation for Chief Executive Vikram Pandit in 2008, according to a proxy filing. Had the bank valued Pandit's stock and option grants as of the date they were granted, his reported compensation would have been $38.2 million.

Pandit was awarded much of his 2008 compensation on January 22 of that year, when Citigroup shares closed at $24.42. The stock closed Tuesday at $2.97, and Pandit's awards are now either under water or show paper losses.