The U.S. Securities and Exchange Commission (SEC) published the final version of its new Pay Versus Performance Disclosure Rules (PVP) in August 2022. The rules make detailed analysis of the compensation actually paid to the Board of Directors (CAP) necessary, including a comparison of the company's financial results and Total Shareholder Return compared to competitors over the past five years.
The PVP Disclosure Rules are the final piece of a proposal for the publication of pay and performance information of listed companies that has been developed since 2015 on the basis of the Dodd-Frank Act. The latest amendments to the document were incorporated by the SEC in late 2021 and early 2022. The new requirements will first become effective for companies with fiscal year-end in December 2022. This means that companies with a fiscal year identical to the calendar year will have to publish their relevant disclosures in the 2023 proxy statements.
In an action-oriented viewpoint flyer and supplementary Q&A, a team of compensation experts from Pay Governance LLC – our strategic partner for North America and Asia –, explains the background of the new PVP directive and elaborates on the most important changes in terms of compensation transparency. This is followed by current market practice. In the view of John Ellerman, Ira T. Kay, Michael Kesner and Ben Stradley, listed companies can and should start preparing relevant information now or at least develop the corresponding processes, especially since the disclosure of equity-based compensation will challenge companies.
The tabular overviews contained in the documents make it easier to understand the key transparency requirements for compensation and performance disclosures. At the same time, a sample table is provided for filling in the relevant disclosures.
You are cordially invited to contact the Board Services and Corporate Governance experts of hkp/// group if you have any questions regarding the new SEC guidelines.
- Regine Siepmann, Senior Partnerin, firstname.lastname@example.org
- Nina Grochowitzki, Partnerin, email@example.com