The Advisors' Blog

Here’s a guest blog from J.T. Ho and Bobby Bee of Orrick, which passes along some helpful informal Staff guidance on the level of detail required in PvP footnote disclosure of “compensation actually paid”:

“A common question we have received from issuers as they prepare their new pay versus performance disclosures relates to just how much footnote detail is required to explain the calculation of “compensation actually paid.” Item 402(v)(3) of Regulation S-K requires (emphasis added):

“(3) For each amount disclosed in columns (c) [Compensation actually paid to PEO] and (e) [Average compensation actually paid to non-PEO named executive officers] of the table required by paragraph (v)(1) of this section, disclose in footnotes to the table each of the amounts deducted and added pursuant to paragraph (v)(2)(iii) of this section, the name of each named executive officer included as a PEO or in the calculation of the average remaining named executive officer compensation, and the fiscal years in which such persons are included. For disclosure of the executive compensation actually paid to named executive officers other than the PEO, provide the amounts required under this paragraph as averages.”

The question is whether the footnotes, as they relate to the pension value adjustments and equity award adjustments required by Item 402(v)(2)(iii)(B)(1) and Item 402(v)(2)(iii)(C)(1), could be limited to disclosing solely the aggregate amount calculated for pension value adjustments and equity award adjustments, respectively. This would be in lieu of having the footnotes disclose each of the amounts deducted and added, pursuant to sub-Items 402(v)(2)(iii)(B)(1)(i) – (ii) and sub-Items 402(v)(2)(iii)(C)(1)(i)-(vi), to arrive at such aggregate amounts, as presented in the “Model Pay Versus Performance Disclosure” from the Compensation Standards.com Special Session: “Tackling Your Pay Vs. Performance Disclosures.”

See an excerpt of the sample footnotes below, with the crux of the question whether issuers could disclose just the final adjustment columns, for each year, in their footnote disclosures:

Pension Value Adjustment Sample Footnote:

(x)….The amounts deducted or added in calculating the pension benefit adjustments are as follows:

Equity Award Adjustment Sample Footnote:

(y)…The amounts deducted or added in calculating the equity award adjustments are as follows:

We spoke with a representative from the SEC’s Office of Small Business Policy in the Division of Corporation Finance, who confirmed the SEC expects each of the amounts identified in the tables above to be included as part of the footnotes.

Issuers and service providers alike should take note of this expectation in connection with preparing and reviewing the pay versus performance disclosures.”

I apologize for the funky formatting of the tables. I wasn’t trying to pay tribute to Wonder Woman’s invisible jet – there are supposed to be row and column lines in the tables. In fact, they’re on my draft. Your guess is as good as mine as to why those lines don’t show up in published version of the tables, although I can’t rule out my own lamentable lack of skill as a cause.  For the record, the Word document that J.T. and Bobby sent was perfectly formatted.  Also, this kind of thing never happened when Liz was in charge. . .

– John Jenkins