SEC Adopts Pay Versus Performance Disclosure Rules

As required by the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act"), the Securities and Exchange Commission (the "SEC") has adopted final rules requiring most public companies to present executive pay versus performance ("PVP") disclosures, which are intended to help investors more clearly understand the relationship between executive compensation and company financial performance in prior years, and make such information readily comparable across public companies.  

Affected companies (excluding emerging growth companies, registered investment companies, and foreign private issuers) are required to include significant new executive compensation-related disclosures in their proxy statements and information statements, beginning with 2023 proxy statements and information statements for companies with fiscal years ending on or after December 16, 2022. 

Affected companies should begin preparing their PVP disclosures for their 2023 proxy statements, as the required elements, many of which are based on historical compensation and may involve departed executives, require novel calculations and analysis above and beyond what the executive compensation disclosure rules previously required. Further, the new PVP disclosures are not strictly quantitative or tabular in nature. Accordingly, each affected company will also need to analyze and present new narrative and/or graphic disclosures describing the relationship between paid executive compensation and company performance across multiple fiscal years.

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