FAR Final Rule on Executive Pay Reporting

The interim rule (from July 2010) requiring certain contractors and first-tier subcontractors to report executive compensation, was finalized yesterday. Nothing substantial changed from the interim rule. Contractors and first-tier subcontractors who receive more than 80 percent of their funding from federal sources and where those revenues exceed $25 million must report the compensation paid to the five highest paid executives in the company.

Compensation, in the context of this new rule, includes not only salaries but also bonuses, stock, stock options, stock appreciation rights, earnings for services under non-equity incentive plans, changes in pension values, and above-market earnings on deferred compensation.

The final rule included many public comments and responses. Most of these offered up sound arguments as to why this information should not be collected and made available to the public. The FAR Counsel's answer was always the same; "The public disclosure of executive compensation information implemented under this rule is a statutory requirement." In other words, if you want to the requirement to go away, go see your elected officials.