On April 29, 2015, nearly five years after the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Act”) was enacted, the Securities Exchange Commission (“SEC”) issued proposed rules as the next step in implementing Section 953(a) of the Act, the pay-for performance disclosure requirement. The vote among the Commissioners was split 3-2, reflecting divided opinions on the proposed rule.
The proposal would generally mandate that a company disclose in its proxy or information statement: the “actual pay” of its principal executive officer (“PEO”), average “actual pay” for its other named executive officers (“NEOs”), the company’s total shareholder return (“TSR”) and TSR for the company’s peers (which may include a standardized index), each on an annual basis, over the five most recently completed fiscal years, subject to a phase-in period. The information would be presented in a prescribed table, with a subsequent description of the reported relationships. Supplemental disclosure is permitted, but not required. The proposed disclosure requirements would not apply to emerging growth companies or foreign private issuers, and smaller reporting companies would be subject to scaled disclosure requirements. There is a 60- day comment period, following which the SEC will vote on it a second time before it can take effect.