SEC Proposal Would Require Companies to Disclose Executive Pay in Connection with Financial Performance

The Securities and Exchange Commission (SEC) in late April proposed a ruling that would require corporations to disclose the relationship between executive pay and fiscal performance. The proposed rules would create a greater dimension of transparency and allow shareholders to be better informed when they elect directors.

“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,” SEC Chair Mary Jo White stated in the news release. “The proposal would require enhanced disclosure that can be compared across companies.”

Per the proposed ruling, companies will be required to disclose executive compensation and performance results in a new table and tag in the information in interactive data format. Additionally, the company would also be required to report its total shareholder return (TSR) and the TSR of companies in a peer group.

Companies would be required to disclose information for the last five fiscal years, with exception for smaller reporting companies, which would only be required to disclose information for the last three fiscal years.

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

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