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SEC Renews Push for ‘Pay-Versus-Performance’ Proxy Disclosures (1)

Jan. 27, 2022, 5:00 PMUpdated: Jan. 27, 2022, 9:59 PM

The SEC is seeking fresh public feedback on a long-stalled proposal for companies to report in proxy materials the relationship between their financial results and executive compensation.

The Securities and Exchange Commission reopened the public comment period on “pay-versus-performance” rules it proposed in 2015, the agency said Thursday.

The rules are intended to help shareholders make more informed votes on executive compensation and board directors. Companies pushed back against the 2015 proposal, saying it didn’t allow enough flexibility to adequately show the relationship between a company’s performance and its executives’ pay. The plan was then shelved during the Trump administration.

The SEC’s decision to look again at the plan comes as Democratic Chair Gary Gensler has moved to increase corporate disclosures on a host of environmental, social, and governance issues important to investors.

The Dodd-Frank Act rules were first proposed during the Obama administration, following concerns that multi-million-dollar compensation packages for JPMorgan Chase & Co. CEO Jamie Dimon and other executives didn’t correlate with the performance of their firms during the 2008 financial crisis.

“If adopted, this proposed rule would strengthen the transparency and quality of executive compensation disclosure,” SEC Chair Gary Gensler said in a statement. “The Commission has long recognized the value of information on executive compensation to investors.”

The commission issued the proposal on a 3-1 vote without any Republican support. Republican Commissioner Hester Peirce said the plan would “increase the burdens of public company reporting, but seem likely to be of dubious use to investors.”

A final rule could follow in the coming months.

Disclosing Metrics

The proposal would require companies to report their CEOs’ actual pay and other executive officers’ average compensation.

Companies also would need to disclose what their investors and competitors’ shareholders make off their stock. The metric, known as total shareholder return, would help investors determine a company’s performance.

The SEC under Gensler is asking whether it should require additional performance metrics beyond total shareholder return, and allow companies to identify which metric is most important to them.

All the data would go in companies’ proxy statements, which include information shareholders use in making voting decisions at annual meetings.

Activist shareholders and proxy advisory firms might not benefit from additional disclosure metrics, said Jake Downing, a partner in King & Spalding LLP’s Corporate, Finance and Investments practice specializing in executive compensation.

Those groups are already “incredibly sophisticated and able to provide meaningful commentary” for shareholder votes on say-on-pay requirements, he said.

The SEC could achieve the law’s mandate through more generalized rules, he said.

The SEC is more likely to complete final rules this time around, said Christina Thomas, a partner in Mayer Brown LLP’s capital markets practice and former counsel to former Republican SEC Commissioner Elad Roisman. But significant questions remain on how much flexibility would be granted to companies in presenting additional data.

“There’s definitely disagreement on that point,” she said.

The reopened public comment period on the proposal will run for 30 days after it’s published in the Federal Register, likely in the coming days or weeks.

(updates with Peirce's statement in seventh paragraph, comment from attorneys )

To contact the reporter on this story: Andrew Ramonas in Washington at; Lydia Beyoud in Washington at
To contact the editors responsible for this story: Michael Ferullo at; Roger Yu at