The US Securities and Exchange Commission (SEC) is to consult on plans to require companies to disclose the relationship between executive compensation and the financial performance of a company, as part of a move to encourage greater transparency and improve the information available for shareholders voting on director elections and remuneration
The proposed rules would require US listed companies 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 using XBRL.
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.
SEC chair Mary Jo White said: ‘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.
‘The proposal would require enhanced disclosure that can be compared across companies.’
The consultation will be open for 60 days after publication in the Federal Register.
Further information on the proposals is available here
