SEC Proposal Would Raise Executive Perks Reporting Threshold to $150,000

The Securities and Exchange Commission proposed a narrower framework for public-company pay disclosures Friday, Nov. 13, reducing the number of executives generally named individually and lifting the perks reporting floor to $150,000.

The amendments would revise Item 402 of Regulation S-K, which governs public-company disclosures on executive and director compensation. They would change both the roster of officers covered and the way companies present compensation information.

Companies generally would identify two executives individually: their principal executive officer and principal financial officer. The existing approach typically covers five or more officers, while the proposal would limit that group to two in most cases.

The SEC would replace four main compensation tables with three: an Earned Compensation Table, a Granted Compensation Table and a Status of Equity Awards Table. The tables would separate compensation earned from compensation granted and provide a distinct view of equity award status. Narrative explanations would accompany the figures, with awards tracked across their lifecycle.

SEC Chair Paul Atkins said the proposal “aims to elicit more informative disclosure rooted in materiality.”

The minimum aggregate value that triggers perquisite reporting would rise to $150,000 from $10,000. The proposal would also create a de minimis exclusion for tracking perks. Companies’ Compensation Discussion and Analysis would need to cover three topics, replacing the current rule’s list of 15 examples.

For pay-versus-performance disclosures, companies would report fewer performance measures. The proposal would replace the “Compensation Actually Paid” calculation with total compensation earned in the new Earned Compensation Table.

The pay-ratio calculation would use only U.S. full-time employees to determine the median worker, with companies identifying that employee every five years. The proposal would also remove annual-report cover-page check boxes and some disclosures on how companies apply clawback policies. The clawback process itself would not change.

The review drew more than 80 comment letters. In February, Atkins outlined materiality, simplification and modernization as principles for revisiting Item 402. The last comprehensive overhaul of executive and director compensation disclosure rules came in 2006.

Comments will be accepted for 60 days after the proposing release is published in the Federal Register.