InfoBytes Blog
SEC reopens comments on “pay versus performance” proposal
On January 27, the SEC reopened the comment period on a proposed rule to amend the current executive compensation disclosure rule and implement Dodd-Frank’s “pay versus performance” requirement. Item 402 of Regulation S-K requires companies to disclose the relationship between their financial performance and executive compensation. The proposal (originally published in 2015, and covered by InfoBytes here), was intended to give shareholders new metrics by requiring registrants to clearly disclose “the relationship between executive compensation actually paid and the financial performance of the registrant.” All reporting companies, except smaller companies, would be required to disclose the relevant compensation information for the last five fiscal years. Smaller reporting companies would only be required to disclose the information for the past three fiscal years, and foreign private issuers, registered investment companies, and emerging growth companies would be exempt from the relevant Dodd-Frank statutory requirement.
According to the SEC, the reopening of the comment period will allow interested persons to comment on the proposed rules in light of developments since the 2015 proposal was released. The SEC noted in its press release that, in reopening the comment period, the Commission is “considering whether additional performance metrics would better reflect Congress’s intention in the Dodd-Frank Act and would provide shareholders with information they need to evaluate a company’s executive compensation policies.” SEC Chair Gary Gensler signaled support for the proposed rule, noting that it would “strengthen the transparency and quality of executive compensation disclosure,” and would fulfill a Congressional mandate under Dodd-Frank. However, Commission Hester M. Peirce dissented, stating that while she agreed it is time to move forward on the “nearly twelve-year-old Dodd-Frank rulemaking mandate,” she disagreed with the approach and would have favored a re-opening release that asked the public “whether [the SEC] should permit companies greater flexibility to determine which financial performance measure is appropriate in this context and to determine how to calculate executive compensation actually paid.”