The Advisors' Blog

Last Thursday, the SEC held its roundtable on executive compensation disclosure requirements. Our own Dave Lynn (who spoke on a panel) noted on TheCorporateCounsel.net blog on Friday that the event was well-attended. If you missed it — either in person or virtually — the SEC posted a replay of each panel on the SEC’s YouTube channel. And if listening to 4+ hours of discussion about the SEC’s executive compensation disclosure requirements is just not in the cards for you right now (or ever), we’ve got you covered!

In blogs on TheCorporateCounsel.net on Friday, Dave shared his thoughts and excerpts from the remarks by Chairman Atkins and Commissioners Crenshaw, Peirce and Uyeda. On the Proxy Disclosure Blog, Mark Borges (who also spoke on a panel) shared a few thoughts about revisiting the current disclosure requirements that occurred to him as he listened to the various panelists. Today, I thought I’d share high-level topics, ideas and themes that I heard throughout the three panels, many of which were teed up in advance by Chairman Atkins, and whether there was consensus or some disagreement among the panelists. Here are a few:

– How or whether executive compensation disclosure requirements drive or distort compensation decision making

• Panelists cited the requirement to hold a say-on-pay vote and compensation committees taking into account investor and proxy advisor policies
• Panelists also noted that including executive security spend in the Summary Compensation Table’s calculation of “Total Compensation” can distort investor and proxy advisor perception and analysis of pay (although corporate representatives stressed that the board will make decisions in the best interest of the company regardless)

 

– Whether the executive compensation disclosure requirements effectively convey how the board and compensation committee consider compensation

• A number of panelists supported the suggestion that the disclosure requirements more closely reflect the presentation of pay in board materials — including the “target” and “outcome” tables that compensation committees use

 

– Whether “more is better”

• Investor representatives generally made suggestions for additional disclosures, and issuer or advisor representatives generally suggested that the rules could be shortened and streamlined
• Repeated “asks” by investor representatives included that quantitative disclosures be machine-readable and that the disclosures more clearly present the life-cycle of an equity award

 

– Whether the executive compensation disclosure rules are too granular and attempt to elicit disclosure of ALL the information ANY investor might want to know, instead of focusing on materiality and the reasonable investor standard

• If you’re wondering about the title of this blog, CII’s Bob McCormick shared a story about his high school job making ice cream. He once asked the owner why they make some unusual flavors that weren’t very popular. The owner explained that one customer — who drove 30 minutes each way — really liked them. From there on out, “rum raisin ice cream” was a favorite call back, but panelists disagreed whether the rules should require companies to keep making rum raisin ice cream — i.e., keep disclosing information that is very valuable only to a small subset of investors. Now you know!

 

– Whether simplifying the Item 402 disclosure requirements would actually result in shorter disclosures

• As Dave noted, while say-on-pay required very little disclosure, companies significantly expanded their voluntary disclosures after these votes were legislatively mandated

 

– The complexity and homogenization of pay and the factors driving these developments

• There was generally consensus that companies feeling like they have to follow a “one-size-fits-all” approach to pay programs — with most pay in the form of PSUs — is a bad thing for both companies and shareholders, and that flexibility — including to simplify equity programs to largely time-vested with a long holding period — would be beneficial

 

– Consensus that the prescriptive, tabular requirements generally provide overly complicated and difficult to use disclosures, while some voluntary disclosures are particularly useful (including presentations of realized and realizable pay)

• A few investor representatives described the complicated process they follow to understand executive equity awards, which involves flipping between numerous tables and referencing Form 4s

 

– Consensus among the issuer and advisor representatives that compensation disclosures are too costly to prepare

• Corporate representatives stressed that “every dollar matters” for companies both large and small, while also noting the outsized burden on less-resourced small- and mid-cap companies

 

We’ll be posting memos — like this Weil resource identifying four themes — in our “SEC Rules” Practice Area and sharing more content & takeaways from the roundtable and submitted comment letters over the next weeks and months. We’ll also be covering this and any updates at our “Proxy Disclosure and 22nd Annual Executive Compensation Conferences.”

Our 2025 Conferences will be taking place Tuesday & Wednesday, October 21 & 22, at the Virgin Hotels in Las Vegas, with a virtual option for those who can’t attend in person. The early bird rate is ending soon! You can sign up by emailing info@ccrcorp.com or calling 800-737-1271.

– Meredith Ervine