US companies will be required to disclose information reflecting the relationship between executive compensation and the company’s financial performance, according to new amendments adopted by the US Securities and Exchange Commission (US SEC). The company will need to report its total shareholder return (TSR), the TSR of companies in its peer group, its net income and three to seven financial performance measures (KPIs) chosen by the company. The so-called ‘Pay Versus Performance’ rule was first proposed in 2018 and was re-opened in January of this year. Companies must begin to comply with these new disclosure requirements in their proxy and information statements for fiscal years ending on or after 16 December. US SEC Chair Gary Gensler said: “The Commission has long recognised the value to investors of information on executive compensation. Building upon [a] long tradition of disclosure, today’s rule makes it easier for shareholders to assess a public company’s decision-making with respect to its executive compensation policies.”
Today the Commission adopted pay versus performance rules that would implement a requirement as mandated by the Dodd-Frank Act.
— Gary Gensler (@GaryGensler) August 25, 2022