October 16, 2023
Pay Versus Performance: Clarification on Transition Relief and EGCs
The Center for Audit Quality (CAQ) SEC Regulations Committee recently released the highlights from its meeting with SEC Staff on March 21, 2023. At the meeting, the SEC Staff clarified that instruction 1 to paragraph (v) of Item 402 of Regulation S-K — which provides the transitional relief that allows companies to initially disclose three years of pay versus performance information instead of five — applies when companies lose EGC status. Here’s an excerpt:
The Committee and the staff discussed the following question regarding implementation of the recently adopted Pay versus Performance rules:
If a calendar-year Emerging Growth Company (EGC) that completed its IPO in March 2020 lost its EGC status on December 31, 2023, how many years of Pay versus Performance disclosure would the registrant be required to provide in its annual meeting proxy statement to be filed in early 2024?
The staff confirmed that consistent with the transition provisions in S-K 402(v)(8) and Instruction 1 to S-K 402(v), the registrant referred to above would be required to provide three years of Pay versus Performance disclosure (two years for a Smaller Reporting Company (SRC)) in its early 2024 proxy statement.
– Meredith Ervine