America’s Million-Dollar Superintendents

Should public schools’ financial statements look more like public companies’?

By J.H. Snider

The Securities and Exchange Commission, which regulates the financial statements of public companies, has rigorous rules requiring the disclosure of compensation for senior executives. These rules should serve as a model for the disclosure of compensation for public school employees, especially superintendents.

The SEC’s rules were gradually built up in response to frequently recurring scandals revealing that, absent forced government disclosure, corporate CEOs, often with the tacit approval of their boards of directors, have strong incentives to secretly pay themselves above market compensation at shareholder expense. For each of the top five highest-paid executives in a public company, the SEC rules require disclosure of all forms of compensation, including salary, bonus, stock options, nonequity incentives, and changes in pension value and other deferred compensation. All of this compensation information must be disclosed in publicly filed reports freely available via the Internet.

The signature feature of the SEC’s newest rules, effective Dec. 15, is that companies must add up all compensation in a single figure, which facilitates easy comparisons across time and companies. To derive a total-compensation number, the SEC made difficult and controversial assumptions about the present value of stock options, deferred compensation, and other uncertain future income streams. But the effort was widely defended because the health of financial markets...