SEC Adopts Final Rule Requiring ‘Pay Versus Performance' Disclosure

Overview

On Aug. 25, 2022, the Securities and Exchange Commission (SEC) adopted a new rule requiring public companies (subject to some notable exceptions, described below) to disclose, in proxy statements and information statements that contain executive compensation disclosure, "pay versus performance" data for the chief executive officer and other named executive officers. The final rule, which is intended to enable investors to more readily assess executive compensation actually paid relative to the company's financial performance, applies to disclosure for fiscal years ending on or after Dec. 16, 2022. In effect, this means that most proxy statements for 2023 annual meetings of stockholders are required to comply with the new rules. Emerging growth companies, registered investment companies and foreign private issuers are exempted from the disclosure requirements, and smaller reporting companies are entitled to provide alternative scaled disclosure.