SEC Pay Versus Performance Ruling

Earlier this year, the U.S. Securities and Exchange Commission (SEC) reopened the comment period on proposed pay-versus-performance rules under the Dodd-Frank Act that would require disclosure of information about the relationship between executive compensation paid by a company and the company's financial performance. The SEC also considered adding new disclosure requirements in the final pay-versus-performance rules. This was done to give interested parties the opportunity to analyze, comment and update the proposed rules—of which had not been addressed since 2015.

Summary of the Proposed Amendments

• The proposed rules would apply to all companies, except for foreign private issuers, registered investment companies, and emerging growth companies.
• Disclosure would be required in any proxy or consent solicitation material prepared for an annual report.
• Companies would be required to provide a comparison of the “compensation actually paid” to executive officers with the company’s total shareholder return (TSR), in a structured tabular format.
  • The SEC is proposing three additional disclosure items to be presented in tabular form:
    • Pre-tax net income,
    • Net income, and
    • A measure specific to a particular registrant, chosen by said registrant (Company-Selected Measure)
• Inline XBRL would be required.

SEC Chair Gary Gensler believed that if adopted, the proposed rules would “strengthen the transparency and quality of executive compensation disclosure.” 

While the comment period is now closed as of March 4, 2022, there is discussion that the SEC is not done with this proposed ruling and will plan to open it back up later this year.

What’s Next

We will continue to keep you apprised on all things SEC and rule-making and what the implications are for your business. As your trusted advisor and leading resource on regulatory changes, we will continue to provide you with the latest updates to ensure that you are prepared and ready for whatever comes next.