The Securities and Exchange Commission (SEC) has adopted rule amendments addressing executive pay versus performance disclosure.
“The Commission has long recognized the value to investors of information on executive compensation,” SEC Chair Gary Gensler said, noting the rule makes it easier for shareholders to assess a public company’s decision-making with respect to its executive compensation policies. “I am pleased that the final rule provides for new, more flexible disclosures that allow companies to describe the performance measures it deems most important when determining what it pays executives. I think that this rule will help investors receive the consistent, comparable, and decision-useful information they need to evaluate executive compensation policies.”
The guidance requires registrants to disclose information reflecting the relationship between executive compensation actually paid by a registrant and the registrant’s financial performance. The amendment implements a requirement mandated by the Dodd-Frank Act.
Per the SEC, the amendments require registrants to provide a table disclosing specified executive compensation and financial performance measures for the five most recently completed fiscal years. Each registrant will be required to report its total shareholder return (TSR); the TSR of companies in the registrant’s peer group; its net income; and a financial performance measure chosen by the registrant.
The adopting release will be published on SEC.gov and in the Federal Register, according to the SEC, with final rules slated to become effective 30 days following publication of the release in the Federal Register.