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SEC Adopts Pay Versus Performance Compensation Disclosure Requirements

On August 25, 2022, the Securities and Exchange Commission (“SEC”) adopted rules that amend Item 402 of Regulation S-K to require reporting companies to disclose information detailing the relationship between a company’s financial performance and executive compensation that was actually paid by the company over a five-year period (the relationship is referred to herein as “Pay Versus Performance”). The Pay Versus Performance rules were originally proposed in 2015 to implement the pay versus performance requirement in the Dodd-Frank Act and the SEC reopened the comment period for the proposed rules in 2022. The final rules will be effective for proxy statements filed in 2023 for calendar year-end companies.

The amendments require tabular disclosure, per new Item 402(v) of Regulation S-K, as part of the executive compensation section of a company’s proxy statement or information statement. The table must be accompanied by a graphical or narrative description, or both, of a company’s Pay Versus Performance. Additionally, companies must disclose a list of the important financial performance measures used to determine executive performance–based compensation. Disclosure requirements are modified for smaller reporting companies (“SRCs”). Emerging growth companies, foreign private issuers, and registered investment companies are not subject to this new disclosure rule.

Below is an example of the required table and a summary of the new disclosure requirements.

Pay Versus Performance Table per Item 402(v) of Regulation S-K


Summary Compensation Table Total for PEO ($)

Compensation Actually Paid to PEO ($)

Average Summary Compensation Table Total for Non-PEO NEOs ($)

Average Compensation Actually Paid to Non-PEO NEOs ($)

Value of Initial Fixed $100 Investment Based on:

Net Income ($)

[Company -Selected Measure]*§

Total Shareholder Return ($)

[Peer Group Total Shareholder Return ($)]*























































*Not required for SRCs

§Placeholder for a company’s most important financial performance measure for the most recent fiscal year (e.g., Total Revenue)

Disclosure Periods – Column (a)

For initial filings, the SEC is allowing companies to only include information for the prior three most recent fiscal years, adding another year of disclosure in each of the two subsequent annual Pay Versus Performance disclosures for a total of five years of disclosures. SRCs are initially required to only provide information for the prior two most recent fiscal years, adding another year of disclosure in the subsequent annual Pay Versus Performance disclosures for a total of three years of disclosures.

Principal Executive Officer Compensation – Columns (b) and (c)

(b) Summary Compensation Table Total for the Principal Executive Officer. The total executive compensation of the Principal Executive Officer (“PEO”) as reported in the Summary Compensation Table included in the filing.

(c) Compensation Actually Paid to PEO. The total compensation of the PEO as disclosed in the Summary Compensation Table with certain adjustments for benefits and equity awards so that the amount reflects compensation “actually paid” to the PEO. Notably, the adjustments exclude the changes in the present value of benefits and pension plans not attributable to the relevant year of service, and include the fair value of equity awards at the vesting date rather than the grant date.

Non-Executive Officer Compensation – Columns (d) and (e)

(d) Average Summary Compensation Table Total for Non-PEO Named Executive Officers. An average of the total compensation of all remaining Named Executive Officers (“NEOs”), other than the PEO reported in the Summary Compensation Table, included in the filing.

(e) Average Compensation Actually Paid to Non-PEO NEOs. The average compensation actually paid to all remaining NEOs from the summary compensation table, adjusted as described above for the PEO.

Shareholder Return – Columns (f) and (g)

(f) Total Shareholder Return. The company’s total shareholder return (“TSR”) on an annual basis, calculating TSR as set forth in Item 201(e) of Regulation S-K for use in the stock performance graph.

(g) Peer Group Total Shareholder Return. The TSR on an annual basis of the company’s peer group used in its stock performance graph or in its Compensation Discussion and Analysis (“CD&A”). This disclosure is not required for SRCs.

Note: The SEC clarified that both TSR and peer group TSR should be calculated based on a fixed investment of one hundred dollars at the “measurement point,” which is set as the market close on the last trading day before a company’s earliest fiscal year in the table.

Financial Performance – Columns (h) and (i)

(h) Net Income. The company’s net income for the respective year of service.

(i) Company-Selected Measure. The Company-Selected Measure must be a financial performance measure, which based on the company’s assessment, represents the most important performance measure (that is not otherwise required to be disclosed in the table (TSR or net income for example)) used by the company to link compensation actually paid to NEOs to company performance in the most recently completed fiscal year. The Company-Selected Measure may change from year-to-year, but for each filing, the disclosure for each covered fiscal year must be based on the Company-Selected Measure for the most recently completed fiscal year. Measures that are not financial measures under GAAP are treated similarly to how they are treated in the company’s CD&A. Specifically, they will not be subject to the reconciliation requirements of Regulation G or Item 10(e) of Regulation S-K, but companies must provide disclosure on how the number is calculated from the company’s audited financial statements. Disclosure of the Company-Selected Measure is not required for SRCs or if the company did not use any financial performance measure in setting pay-for-performance compensation in the last completed fiscal year.

Tabular List of Important Financial Performance Measures

A company must also provide a list in table form of at least three and no more than seven of its most important financial performance measures used to determine Pay Versus Performance. A company may include non-financial performance measures in the list if those measures are deemed among the most important performance measures; however, non-financial performance measures may be included only if the company has already listed three of the most important financial performance measures. The determination of which measures are most important must be based on the most recent fiscal year rather than the entire time period of the disclosure. The measures included in the list need not be ranked; however, as discussed above, companies are required to identify their most important financial performance measure and include it in the Pay Versus Performance Table as the Company-Selected Measure. This disclosure is not required for SRCs.

Graphical and/or Narrative Description of Pay Versus Performance

Additionally, using the information presented in the Pay Versus Performance table, companies are required to provide a narrative, graphical, or combined narrative and graphical description of Pay Versus Performance. Specifically, companies must describe the relationship between both PEO and average non-PEO NEO compensation and three measures of financial performance, as follows: (i) the company’s cumulative TSR, (ii) the company’s net income, and (iii) the Company-Selected Measure, in each case over the five most recently completed fiscal years. Additionally, companies must describe the relationship between TSR and Peer Group TSR. SRCs are only required to illustrate the relationships between executive pay and the measures they are required to include in the Pay Versus Performance Table over the three most recently completed fiscal years.

Effective Date of the New Rules and XBRL Tagging

Companies must comply with the new pay for performance disclosure requirements in proxy and information statements that are required to include executive compensation disclosures under Item 402 of Regulation S-K for a fiscal year ending on or after December 16, 2022. For a calendar year-end company, this will be in its 2023 proxy statement. The Pay Versus Performance disclosures are not required to be included in Annual Reports on Form 10-K or in Registration Statements.

Further, the SEC requires companies to use Inline XBRL to tag Pay Versus Performance data. SRCs are only required to provide Inline XBRL data as of their third Pay Versus Performance disclosure filing.

Preliminary Action Items

Companies should begin to prepare for these new disclosure requirements now. Beyond preparing to collect the data necessary to calculate the new compensation and TSR amounts required to be disclosed, companies will want to consider how the new Pay Versus Performance disclosure will interact with and affect their other proxy statement disclosures. For instance, with the concept of Pay Versus Performance now defined by a set of required disclosures applicable to all companies, it is likely that companies will want to anticipate changes to their CD&A, in light of past disclosures on the relationship between executive pay and performance, as well as the possible need to integrate the new “actually paid” compensation amounts into the discussion.

For more information on the new Pay Versus Performance rules or any of the SEC’s other rulemaking initiatives, please contact us or one of our Mintz Corporate & Securities colleagues.


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Xandy Walsh


Xandy’s practice focuses on corporate and transactional matters, specifically focused on private equity and venture capital transactions, energy and infrastructure projects, and general corporate matters. He works with companies in a range of industries and leverages his prior experience as an energy regulator working with clients in the energy industry.
Anne L. Bruno is a Member at Mintz who advises clients ranging from start-ups to multinational public companies on issues related to corporate and employment law, including executive compensation, employee benefits, securities law, and corporate governance. She is also a key member of the firm’s multidisciplinary ESG practice, helping corporate boards, companies, and their investors navigate a broad range of environmental, social, and governance considerations.
Dan is a corporate and securities attorney whose practice spans the full gamut of corporate law. He has advised clients for over two decades in public and private equity and debt financings, securities law matters, mergers and acquisitions, and strategic advice on a broad range of other corporate matters. He capably counsels public and private companies with offerings, compliance, and securities questions and leads buyers and sellers throughout the transaction process. Dan represents life sciences companies as well as clients in other technology fields, financial services, and professional services firms.