The SEC adopts pay-for-performance rules: 5 things to know
Here are five things to know about these new rules:
1. The compliance date is already upon us! Perhaps most surprising is the speed with which these new rules will need to be addressed in the proxy. The new rules become effective 30 days following publication of the adopting release in the Federal Register.
Other than for those exempt from the new rules (i.e., emerging growth companies, registered investment companies, foreign private issuers), companies will need to comply for proxy statements and information statements that are required to include Item 402 executive compensation disclosure for fiscal years ending on or after December 16, 2022. Which means this new disclosure is required for the proxy statements filed next year for the 2023 proxy season.
2. Three years of P4P disclosure to start (then adding a year for the next two years). Companies will need to provide three years’ worth of P4P disclosure in their first proxy statement that includes this disclosure. Then, in each of the two subsequent proxy statements that require the Item 402(v) disclosure, they will need to add another year of disclosure. Companies will eventually wind up with five years of P4P disclosure. And all the P4P disclosure must be provided in XBRL.
Smaller reporting companies (SRCs) get a break, as usual, initially being required to provide only two years’ worth of information, and then adding one additional year of disclosure in the subsequent proxy that requires this disclosure, and will eventually wind up with three years of P4P disclosure in their proxy (but don’t need to provide it in XBRL until the third proxy that includes P4P disclosure).