The Securities and Exchange Commission adopted amendments to rules requiring registrants to disclose information reflecting the relationship between executive compensation actually paid by a registrant and the registrant's financial performance, according to an Aug. 25 news release.
The rules implement a requirement mandated by the Dodd-Frank Act.
Key takeaways from the adopted amendments:
- Registrants must provide a table disclosing specified executive compensation and financial performance measures for their five most recently completed fiscal years.
- The registrant must report its total shareholder return.
- The registrant must report the total shareholder return of registrant peer-group companies.
- The registrant must report their net income.
- The registrant must report a financial performance measure chosen by the registrant.
- Registrants will be required to describe the relationships between the executive compensation actually paid compared to each of the performance measures, as well as the relationship between the registrant's total shareholder return and the total shareholder return of its selected peer group.
- Registrants will also be required to provide a list of three to seven financial performance measures that it determines are their most important performance measures for linking executive compensation actually paid to company performance.
Securities and Exchange Commission Chair Gary Gensler said that the commission recognized the value of accessible information on executive compensation.
"Today's 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," Mr. Gensler said.
The commission proposed pay versus performance disclosure rules in 2015 and reopened the comment period on the proposal in January, according to the news release.