Insights
Alert
SEC Finalizes Pay Versus Performance (PVP) Disclosure Rule, Requiring Complex Calculations for 2023
Alert | By David Gordon, Kenneth Sparling, Dina Bernstein, Andrew Lash, Samantha Nussbaum, David Yang
On August 25, the SEC released the long-awaited final rule that implements the requirement in the Dodd-Frank Act that proxy statements contain a “clear description” of “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 stock.” While no changes are being made to the current Summary Compensation Table (SCT) requirements, the new PVP Rule will require recalculation of various SCT inputs and will result in:
- The creation of a new PVP Table
- Many companies having to make hundreds of new calculations for the new table to replace the grant date stock values in the SCT with new stock values for the NEOs
- Replacement of the pension cost number in the SCT with a new number representing service cost and the prior service cost for amendments during the year
- Companies having to provide a clear description of the relationship between executive compensation, as newly defined, and various financial metrics
- Companies having to select its 3-7 most important financial metrics used to “link” executive compensation to performance and to provide financial information with respect to the most important measure.
The new rule is effective for proxy statements for fiscal years ending on or after December 16, 2022.
David GordonManaging Director
Dave Gordon’s practice as an executive compensation consultant stretches back over a decade. He has covered a variety of industries, including extensive experience with financial institutions and utilities. In addition to engagements for his own clients.
Kenneth Sparling
Managing Director
Ken Sparling’s assignments have been with both public and privately-held companies in various industries. His consulting engagements focus on all aspects of executive and board compensation including annual and long-term incentive programs, employment agreements and change-in-control arrangements.
Dina Bernstein
Principal
Dina Bernstein has extensive experience advising on all aspects of executive compensation, working with companies on an ongoing basis, as well as in the context of mergers and acquisitions, spin-offs, initial public offerings, and other corporate events. Dina provides guidance to private and public companies across various industries regarding cash and equity incentive compensation arrangements, employment, severance and change in control agreements, overall compensation program design, pay governance practices, taxation, stock exchange listing requirements and securities regulation compliance.
Andrew Lash
Consultant
Andrew Lash works with public and private companies across a variety of industries, consulting on executive and non-employee director pay practices and compensation program considerations in general.
Samantha Nussbaum
Principal
Samantha Nussbaum has consulted on behalf of public and private companies, compensation committees, and senior management on all aspects of executive compensation. Samantha’s consulting and legal background includes advising on executive compensation in the context of mergers and acquisitions, spin-offs, and initial public offerings; executive employment, severance, and change in control agreements; equity incentive plans; deferred compensation; and securities laws, including reporting and disclosure implications.
David Yang
Managing Director
David Yang has advised numerous public and privately-held companies on all aspects of executive and board compensation. His experience covers a wide range of industries, including healthcare, financial services, retail, consumer products, transportation, and technology among others. He is a frequent speaker on executive compensation topics and a regular author of the firm’s alert letters.