SEC looking to revive rule on exec pay disclosures

February 4, 2022

The Securities and Exchange Commission (SEC) is calling for public feedback on a proposed rule requiring companies to disclose links between corporate performance and executive compensation.

The rule, originally proposed in 2015 but never finalized, would require a company’s proxy statement and other disclosures to include a table showing actual compensation paid to key executives, alongside total shareholder return and the annual total shareholder returns of a peer group of companies.

It would also require firms to disclose their CEO’s pay and other executive compensation information.

The SEC is also considering allowing companies to showcase an additional metric of their choosing.

As part of its request for comments, the SEC is also seeking feedback on additional requirements. These include whether registrants should be required to disclose additional performance measures beyond shareholder return, and whether pre-tax net income and net income would be useful financial measures.

Bloomberg Law reports that the plan would force companies to redesign their proxy statements, and potentially lead to even more disclosures if a company feels it needs to put unflattering data in context.

ExxonMobil, FedEx and other firms told the SEC in comment letters that mandatory and uniform metrics would give investors information that did not provide an accurate picture of a company’s circumstances.

SEC chair Gary Gensler said the proposed rule could strengthen the transparency and quality of executive compensation disclosure.

Ani Huang, president and CEO of the Center on Executive Compensation, said: “No one performance metric is appropriate for all companies. Requiring every company to use the same metric in this required disclosure, whether financial or market-based, is not useful to investors.”