March 21, 2024
Pay vs. Performance: Avoiding Common Mistakes
I blogged earlier this year that for 2024 pay vs. performance disclosures, the Corp Fin Staff expects that you’ve digested the feedback and guidance that it issued last year in the form of comment letters and many CDIs. While I am very grateful for all of that helpful guidance, I also was very happy to see this Skadden memo, which provides a concise & timely list of the common mistakes that the Staff will be watching for this year:
1. Failing to describe the relationship between CAP and: (a) TSR, (b) net income and (c) the company-selected measure (CSM).
2. Failing to include the tabular list.
3. Including multiple CSMs or failing to include the CSM in the tabular list.
4. Failing to provide a GAAP reconciliation for non-GAAP CSMs.
5. Using a TSR peer group that does not match either the industry group in the company’s 10-K performance graph or the compensation peer group disclosed in the Compensation Discussion and Analysis (CD&A).
6. Failing to include or identify all NEOs who served each year.
7. Using partial-year compensation (e.g., only including compensation for the time served as an NEO during a given year).
8. Valuing awards that vest during the year based on a year-over-year change, rather than valuing them as of the date of vesting.
Unless you are a smaller reporting company, it’s also important to remember that your PVP disclosures require iXBRL tags!
– Liz Dunshee