Attorney General Martha Coakley has formally asked federal securities regulators to eliminate the technicality that allowed Northeast Utilities to report only a portion of chief executive Thomas J. May’s total compensation for 2012.
Northeast Utilities, in filings with the Securities and Exchange Commission, only disclosed May’s 2012 earnings for the nine months after the company’s April merger with Boston utility NStar, which May led before becoming chief executive of the combined firm. Since NStar is no longer a separate public company, SEC regulations didn’t require Northeast Utilities to report May’s compensation during NStar’s final three months.
In a letter to regulators, Coakley said she is concerned that SEC rules could allow merged companies to avoid reporting financial information important to shareholders and the public.
“This interpretation of SEC disclosure rules, if correct, undermines the SEC’s disclosure regime by failing to provide complete reporting of all relevant compensation,” the AG’s office wrote. “We ask the SEC to examine the position taken by the parties to the Northeast Utilities/NStar transaction and, if the parties’ interpretation is valid, we ask that the SEC take the necessary steps to eliminate loopholes in the reporting regime.”
In an interview, Coakley said she is trying to ensure the transparency about corporate operations that SEC regulations intended.
“It’s important to us and to the public to have that kind of transparency,” she said, so “when we see a gap in the law or we see a problem, we try to take steps to make sure that it’s fixed.”
SEC spokesman John Nester declined to comment directly on Coakley’s letter but said the commission would welcome her views.
May’s missing pay details became an issue when Northeast Utilities reported in a securities filing that he earned $4.2 million in the months following the merger. That amount is less than half May’s $9.2 million compensation for all of 2011.
But last week — after Coakley used her statutory authority as the state’s ratepayer advocate to request details — May disclosed in a letter to the attorney general that he garnered nearly $3.8 million from NStar in the first three months of 2012.
During a brief interview at a luncheon hosted by the Boston College Chief Executives’ Club of Boston Thursday, May said he feels his letter to Coakley has addressed any outstanding questions about his 2012 pay and the merger.
“I’m bare, I’m naked,” May said. He then questioned why Coakley asked the SEC to alter reporting rules that Northeast Utilities has followed.
“It’s not a technicality. Basically, I went to work for another company. If I went to work for Procter & Gamble, would Procter & Gamble be responsible for reporting on my past?” May asked. “I don’t see this as a loophole. I see this as a matter of curiosity at the Globe.”
Barney Frank, a former US representative for Massachusetts and author of the Dodd-Frank financial overhaul law, applauded Coakley’s letter. Financial disclosure rules, Frank said, need to be as detailed as possible to prevent companies like Northeast Utilities from using ambiguities to circumvent the spirit of the law. “The next time you have people complaining of the regulations being too lengthy and complicated, this is an example of why they have to be,” Frank said. He said he expects Coakley’s rule change request to be “very seriously considered” by the SEC, but he isn’t sure how quickly the commission will be able to act.