New SEC "Pay For Performance" Proxy Disclosure Rules Will Require Significant Advance Planning And Effort

More than twelve years ago, the Dodd-Frank legislation directed the SEC to issue a rule that requires issuers to provide, among other things, information that shows "the relationship between executive compensation actually paid and the financial performance of the issuer, taking into account any change in the value of the shares of stock and dividends of the issuer and any distributions." On August 25, the SEC (by a 3-2 vote) issued that rule in final form.

To understate, the rule is exceedingly complicated. And it is in play for fiscal years ending on or after December 16, 2022—in other words starting with the 2023 proxy season (though emerging growth companies, foreign private issuers and registered investment companies are exempt, and smaller reporting companies are subject to somewhat relaxed requirements). That the rule is complicated is not surprising given it was promulgated more than seven years after it was first proposed and following a reopening of the