Slow Train Coming: The SEC's Long-Awaited Final Rules on "Pay Versus Performance"

Thirteen years in the making, following two rounds of proposals and comment periods more than a half a decade apart, and spanning five SEC Commissioners and three Presidential Administrations, on 25 August 2022, the SEC adopted final rules implementing the “pay versus performance” disclosure requirement set forth in the Dodd-Frank Wall Street Reform and Consumer Protection Act, marking the most significant executive compensation disclosure development of the last decade. The expansive, deceptively complex and data-heavy final rules require “pay versus performance” disclosure in 2023 proxy statements for calendar year reporting companies (other than foreign private issuers, registered investment companies, and emerging growth companies), imposing a heavy burden on companies during an otherwise very busy time of the calendar year.

Partners Ali Nardali and Amanda Albert provide an in-depth overview of the final rules, including the mandated “pay versus performance” table, disclosure of the relationships between various financial metrics and executive compensation, and disclosure of the “most important” performance metrics used by companies to determine executive compensation.