August 7, 2024
PVP: 2023 Disclosure Decisions Proved “Durable” in Year 2
As Meaghan previewed in June, PVP disclosures in the 2024 proxy season weren’t very different than first-year disclosures. This Pay Governance alert has more detail on what companies changed – or didn’t – in year 2.
Going into the 2024 proxy season, we anticipated that only a few companies would make changes to their disclosures other than the addition of another year of new data. Much effort and thought went into deciding the Company-Selected Measure, TSR comparison group, and the list of Important Financial Metrics last year; those decisions proved to be durable for this year and likely future years, barring a large incentive program change. Below is a summary of disclosure observations for this year compared to last year:
– 96% of companies used the same Company-Selected Measure as last year
– 86% of companies used the same peer group or index as last year for TSR comparisons. Not surprisingly, the large majority of those companies that had a different peer group were those using custom peer groups whose constituents changed from last year
– 87% of companies had the same number of Important Financial Metrics as last year, 7% had fewer metrics, and 6% had more metrics
– Of those that had the same number of metrics, 93% used the exact same metrics, with only 7% changing their metrics between years
I think it tells a great story about the effort companies put into this disclosure in late 2022 and early 2023 that some of these complicated decisions, like the company-selected measure and which peer group to use for disclosure purposes, as the alert says, “proved to be durable.” Despite the short timeframe to prepare incredibly complicated and specific new disclosures, most companies seemed to “understand the assignment” and, where needed, hired supplemental outside help for valuations and disclosure prep.
I don’t think I’m speaking too soon in saying this, although it’s probably worth reminding everyone that we may learn more from 2024 comment letters that could impact 2025 disclosures.
– Meredith Ervine