Dec. 27 (Bloomberg) -- U.S. Representative Barney Frank, who will head the committee that oversees the Securities and Exchange Commission, said Congress should rein in executive pay after the SEC changed rules for how companies value stock-option awards.

``Backtracking by the SEC on this important matter of stock options reinforces my determination that Congress must act to deal with the problem of executive compensation that is now unconstrained by anything except the self-restraint of top executives,'' Frank, a Massachusetts Democrat, said in a statement today.

The SEC on Dec. 22 said it will let companies report stock- option expenses ``as that cost is recognized'' instead of when awards are made. The change allows companies to spread expenses over many years rather than disclosing them all at once, said accounting experts including Charles Mulford, a professor at the Georgia Institute of Technology.

Frank, the next chairman of the House Financial Services Committee, said it's ``ironic'' that the agency wants to change its rules when regulators are uncovering ``widespread abuses'' in stock-option awards. Almost 200 companies are under investigation for backdating option awards to periods of low share prices, a practice that boosts the value of the grants.

`Very Disappointed'

``I am very disappointed with both the substance and the procedure used to reach the SEC's Christmas Eve decision to loosen reporting requirements,'' Frank said. ``The problem of executive pay that is both greatly excessive and deliberately obscured is a grave one.''

Last week's action by the SEC amended regulations approved by the agency in July, which involved the most extensive overhaul of executive-pay rules in 14 years. The SEC will still require companies for the first time to disclose total pay, perks and lifetime retirement benefits for their five top-paid executives.

The SEC changed its rules to prevent investor confusion, Cox said in a statement today. Under the old rules, executives with ``vastly different compensation,'' may have appeared to receive equal pay, he said.

``Consider the case of two executives who both receive $5 million option packages that vest in four years,'' Cox said. ``If one executive leaves the company five years later, she receives the full $5 million, while the other, who leaves in three years, would receive no compensation from the options. Yet under the old rule, the reported compensation for both would be the same.''

Legislation

Frank, 66, has said curbing excessive executive pay will be a priority when he takes over the financial services panel next month. He said he will push legislation initially introduced last year that would give shareholders greater say over the compensation of chief executive officers.

``It's being revised,'' Frank said in an interview today. ``I plan to get the committee to vote on it.''

The average pay for CEOs of companies listed in the Standard & Poor's 500 index rose 16 percent to $13.5 million in 2005, the Corporate Library said in a September report. Chief executives on average were paid 411 times more than U.S. workers in 2005, a nearly tenfold increase from 1980, according to the Institute for Policy Studies, a research group based in Washington.

Frank in the interview said he plans to discuss the SEC's rule change with Cox tomorrow.

To contact the reporter on this story: Jesse Westbrook in Washington at jwestbrook1@bloomberg.net.

Last Updated: December 27, 2006 18:37 EST