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Thursday, April 30, 2015


SEC Proposes Rules to Require Companies to Disclose the Relationship Between Executive Pay and a Company’s Financial Performance
04/29/2015 03:46 PM EDT

The Securities and Exchange Commission today voted to propose rules to require companies to disclose the relationship between executive compensation and the financial performance of a company.  The proposed rules, which would implement a requirement mandated by the Dodd-Frank Act, would provide greater transparency and allow shareholders to be better informed when they vote to elect directors and in connection with advisory votes on executive compensation.

“These proposed rules would better inform shareholders and give them a new metric for assessing a company’s executive compensation relative to its financial performance,” said SEC Chair Mary Jo White.  “The proposal would require enhanced disclosure that can be compared across companies.”

The proposed rule would require a company to disclose executive pay and performance information for itself and companies in a peer group in a table and to tag the information in an interactive data format.  A company would be required to disclose executive compensation actually paid for its principal executive officer using the amount already disclosed in the summary compensation table required in the proxy statement, making adjustments to the amounts included for pensions and equity awards.  The amount disclosed for the remaining executive officers would be the average compensation actually paid to those executives.  As the measure of performance, a company would also be required to report its total shareholder return (TSR) and the TSR of companies in a peer group.

All companies would be required to disclose the information for the last five fiscal years, except for smaller reporting companies, which would only be required to provide disclosure for the last three fiscal years.  The proposed rules provide phase-in periods for these requirements.

The comment period for the proposed rules will be 60 days after publication in the Federal Register.