Conflict Minerals Rule and Pay Ratio Rule… Are Changes Forthcoming?

Conflict Minerals Rule

Acting SEC Chairman Michael S. Piwowar issued a statement[1] on January 31, 2017 directing the SEC staff to reconsider whether the 2014 Guidance is still appropriate and whether any additional relief is appropriate. The statement also included a 45-day public comment period.

In addition, there has been a leaked draft executive order and rumors that President Donald Trump is going to issue an order that will temporarily suspend the conflict minerals rule for two years based on a “national security interests” rationale.

Additionally, a final ruling on the conflict minerals litigation may be looming. On February 10, 2017, the district court judge ordered the parties in the conflict minerals litigation to file a joint status report, on or before March 10, 2017, indicating whether any further proceedings are necessary, and whether the court should enter an order of final judgement to effectuate the circuit’s decision.

At the recent SEC Speaks conference, Shelly Parratt, acting director of the Division of Corporation Finance, stated that companies must continue to comply with the conflict minerals disclosure rules and that even though the SEC is seeking comments thereon, the rules remain in effect.

What the outcome of the above will ultimately be is unknown. The likelihood of the conflict minerals rule being completely overturned prior to the upcoming May 31st Form SD due date is slim. Accordingly, issuers should steam ahead in their due diligence efforts.

Pay Ratio Rule

A week after issuing the conflict minerals statement described above, Acting SEC Chairman Michael S. Piwowar issued a statement[2] on February 6, 2107 related to the pay ratio disclosure rule in which he explained that it was his “understanding that some issuers have begun to encounter unanticipated compliance difficulties that may hinder them in meeting the reporting deadline.” Therefore, Piwowar stated that he is seeking public comment within 45 days on any unexpected challenges that issuers have experienced as they prepare for compliance and whether relief is needed. In addition, Piwowar directed the SEC staff to reconsider the implementation of the pay ratio rule and whether additional guidance or relief may be appropriate.

At the recent SEC Speaks conference, Shelly Parratt, acting director of the Division of Corporation Finance, stated that companies must continue to comply with the pay ratio disclosure rules and that even though the SEC is seeking comments thereon, the rules remain in effect.

It seems likely that this disclosure rule will be revisited and could be changing.   Nevertheless, at this time, issuers should continue their work in preparing to comply with the pay ratio disclosure rules for the next proxy season.

[1] https://www.sec.gov/news/statement/reconsideration-of-conflict-minerals-rule-implementation.html

[2] https://www.sec.gov/news/statement/reconsideration-of-pay-ratio-rule-implementation.html

Time to Review Your Severance Agreements

In August 2016, the SEC issued cease-and-desist orders against two different companies for using severance agreements which required exiting employees to waive their ability to obtain monetary awards under the SEC’s whistleblower program.

According to the SEC’s order regarding BlueLinx Holdings Inc., beginning prior to August 12, 2011 and continuing through the present, BlueLinx entered into severance agreements with departing employees. While the agreements were not uniform, most contained language prohibiting the departing employees from divulging confidential information, unless compelled to do so by law or legal process. In or about June 2013, BlueLinx reviewed and revised each of its outstanding severance agreements and added provisions which (i) required such former employees to waive their rights to monetary recovery should they file a charge or complaint with the SEC or other federal agencies, and (ii) required such former employees to notify the company’s legal department prior to disclosing any financial or business information to any third parties.

According to the SEC’s order regarding Health Net, Inc., beginning prior to August 12, 2011 and continuing through October 22, 2015, Health Net entered into severance agreements with departing employees. In August 2011, after the whistleblower rules were adopted, Health Net updated its form of severance agreement to add language which prohibited former employees from filing an application for, or accepting, a whistleblower award from the SEC. This language was contained in severance agreement entered into from approximately August 2011 to June 2013. In June 2013, Health Net updated its form of severance agreement to remove the SEC-specific language; however, Health Net retained language that removed the financial incentive for reporting information. On October 22, 2015, Health Net updated its form of severance agreement and struck the restrictive language related to monetary awards.

The SEC charged each of BlueLinx and Health Net with violating Rule 21F-17 under the Exchange Act. Rule 21F-17, adopted pursuant to the Dodd-Frank Act, provides that “[n]o person may take any action to impede an individual from communicating directly with the Commission staff about a possible securities law violation, including enforcing, or threatening to enforce, a confidentiality agreement. . .with respect to such communications.”

BlueLinx consented to the SEC’s cease-and-desist order without admitting or denying the findings. BlueLinx agreed to include in all of its severance agreements after the date of the order language which makes it clear that employees may report possible securities law violations to the SEC and other federal agencies without BlueLinx’s prior approval and without having to forfeit any resulting whistleblower award. In addition, BlueLinx agreed to make reasonable efforts to contact former employees who had executed severance agreements from August 12, 2011 through the present to notify them that BlueLinx does not prohibit former employees from providing information to the SEC staff without notice to BlueLinx or from accepting SEC whistleblower awards. In addition, BlueLinx agreed to pay the SEC a civil penalty of $265,000.

Health Net also consented to the SEC’s cease-and-desist order without admitting or denying the findings. Health Net agreed to make reasonable efforts to inform former employees who signed severance agreements from August 12, 2011 through October 22, 2015 that Health Net does not prohibit former employees from seeking and obtaining a whistleblower award from the SEC under Section 21F of the Exchange Act. In addition, Health Net agreed to pay the SEC a civil penalty of $340,000.

In light of the above orders, companies should review new and existing severance agreements that they have or enter into with former employees to make sure that such documents do not restrict such former employees’ ability to provide information to the SEC or from accepting SEC whistleblower awards. The mere existence of such restrictive language in severance agreements in and of itself could be found to be a violation of Section 21F of the Exchange Act.

What Is Good Corporate Governance? A Commonsense Approach

It seems to be a very simple question that does not always produce a clear-cut response. A group of high profile executives, including CEOs of major US corporations, tried to reach consensus on commonsense principles that are “conducive to good corporate governance, healthy public companies and the continued strength of … public markets.” On July 21, 2016, they released Commonsense Principles of Corporate Governance for public companies to promote further conversation on corporate governance.

These principles do not break new ground in corporate governance – it was not the purpose; these principles serve as a compilation of best practices that provide a “basic framework for sound, long-term-oriented governance.” The authors acknowledge that given the differences among public companies “not every principle … will work for every company, and not every principle will be applied in the same fashion by all companies.” These principles should promote discussions at the executive and board levels. They are a must read for board members, C-suite executives and corporate secretaries. Some of these principles can also be used by private companies and large non-profit organizations. Continue reading “What Is Good Corporate Governance? A Commonsense Approach”

Sec Proposes Anticipated Rules on Pay-Versus-Performance Disclosure

On April 29, 2015, the SEC, in a 3-2 vote of the SEC Commissioners, approved proposed rules (the “pay-versus-performance disclosure”) that would require an issuer to disclose the relationship between the issuer’s executive compensation and the issuer’s financial performance. The proposed rules would implement a disclosure obligation required under Section 953(a) of the Dodd-Frank Act. Chair White noted, in the SEC press release announcing the proposed rules, that the pay-versus-performance disclosure “would better inform shareholders and give them a new metric for assessing a company’s executive compensation relative to its financial performance.”

In particular, the proposed rules would amend Item 402 of Reg. S-K by adding a new Item 402(v) which would require issuers to disclose, in each proxy or information statement requiring executive compensation disclosure under Item 402 of Reg. S-K, the following:

  • the executive compensation “actually paid” to the issuer’s principal executive officer (“PEO”);
  • the executive compensation “actually paid” to the issuer’s named executive officers (“NEOs” ), expressed as an average for all such NEOs;
  • the issuer’s total shareholder return (“TSR” ); and
  • the TSR of a peer group of issuers.

Like all disclosures required under Item 402 of Reg. S-K, the pay-versus-performance disclosure would be subject to the say-on-pay advisory vote.

Compensation Actually Paid

Under the proposed rules, the executive compensation “actually paid” by an issuer means the total compensation for a particular executive disclosed in the summary compensation table adjusted by certain amounts related to pensions and equity awards. The adjusted disclosure represents an attempt by the SEC to reflect the compensation awarded to, or earned by, such executive officer in a particular year of service. In order to calculate the compensation “actually paid” to a particular executive officer, the total compensation disclosed for such executive officer in the summary compensation table would be adjusted to:

  • deduct the aggregate change in the actuarial present value of all defined benefit and actuarial pension plans reported in the Summary Compensation Table;
  • add back the actuarially determined service cost for services rendered by the executive officer during the applicable year;
  • exclude the grant date value of any stock and option awards granted during the applicable year that are subject to vesting; and
  • add back the value at vesting of stock and option awards that vested during the applicable year, computed in accordance with the fair value guidance in FASB ASC Topic 718.

An issuer would need to include footnotes to the pay-versus-performance summary table (see below for the form table) which describes the amounts excluded from and added to the total compensation reported in the summary compensation and the issuer’s vesting date valuation assumptions used (if materially different from the grant date assumptions disclosed in the issuer’s financial statements).

In addition to the required disclosure, an issuer would be permitted to make disclosures to capture the issuer’s specific situation and industry, provided that any supplemental disclosure is not misleading and not presented more prominently than the required pay-versus-performance disclosure. Examples of supplemental disclosure provided in the proposed rules include the disclosure of “realized pay” or “realizable pay” or additional years of data beyond the time periods required.

Peer Group

The peer group utilized for the TSR comparison would be the same peer group used by the issuer in its stock performance graph or in describing the issuer’s benchmarking compensation practices in its CD&A.

Format

The pay-versus-performance disclosure must be provided in tabular form as set forth below.

Year(a) Summary Compensation Table Total For PEO(b) Compensation Actually Paid to PEO(c) Average Summary Compensation Table Total for non PEO Named Executive Officers(d) Average Compensation Actually Paid to non PEO Named Executive Officers(d) Total Shareholder Return(f)

Peer Group Total Shareholder Return

(g)

Following the pay-versus-performance disclosure table, the issuer would be required to describe the relationship between the issuer’s executive compensation actually paid and the issuer’s TSR and the relationship between the issuer’s TSR and the peer group’s TSR.

Issuers will generally need to make the pay-versus-performance disclosure for its five (or three years, in the first applicable filing following the effectiveness of the proposed rule) most recently completed fiscal years.  However, smaller reporting companies will only need to make the disclosure for three years (or two years, in the first applicable filing following the effectiveness of the proposed rule).  In addition, a smaller reporting company would not be required to (i) disclose amounts relating to pensions (consistent with current executive compensation disclosure obligations); nor (ii) present the TSR of a peer group in its pay-versus-performance disclosure.

XBRL

Companies would be required to tag the pay-versus-performance disclosure using XBRL.  Smaller reporting companies would not be required to comply with the tagging requirement until the third filing in which the pay-versus-performance disclosure is provided.

Companies to which Disclosure Requirement Applies

The proposed pay-versus-performance disclosure rules would apply to all reporting companies, except registered investment companies, foreign private issuers and emerging growth companies.

Conclusion

It is unclear whether the pay-versus-performance disclosure will be adopted (and in effect) in time for the 2016 proxy season.  The SEC is seeking comments on the proposed rules for 60 days following their publication in the Federal Register.

ISS’ FAQs on Equity Plan Data Verification – Roadmap for Proxy Statement Disclosures

If you have a proposal to adopt or amend the company’s equity plan in the proxy statement that you file with the SEC after September 8, 2014, then you can use a new data verification portal recently launched by Institutional Shareholder Services Inc. (ISS) to verify key data points underlying ISS’ evaluation of the plan. ISS explains on its website the mechanics of registering for the Equity Plan Data Verification and requesting modifications after reviewing data points posted by ISS.

One of the most interesting pieces of information provided by ISS in connection with the new portal is Appendix A to the FAQs on Equity Plan Data Verification because it lists the questions that ISS includes in its evaluation of equity plans. The questions are divided into several categories: (i) equity plan provisions, (ii) outstanding stock and convertibles, (iii) equity grant activity, and (iv) shares reserved and outstanding under equity compensation programs.

Listed below are certain questions from each category. Some of these questions can be used as a roadmap for proxy statement disclosures related to equity plan proposals in order to facilitate ISS’ review and evaluation of the plan.

Equity Plan Provisions:

  • Is stock option repricing permitted without shareholder approval?
  • Are cash buyouts of underwater stock options permitted without shareholder approval?
  • Does the plan provide for share recycling, whereby the plan’s share reserve is reduced by the net number of shares delivered through equity awards, not the gross number underlying the original awards?
  • Does the plan contain an evergreen provision, pursuant to which the plan’s share reserve is automatically increased annually?
  • What stock acquisition percentage triggers a change-in-control under the plan?
  • Does the plan provide for tax gross-ups on equity awards?

Outstanding Stock and Convertibles:

  • How many common shares are outstanding (includes all classes of common stock) as of the record date?
  • How many common shares are issuable upon (i) exercise of outstanding warrants, (ii) conversion of outstanding convertible debt, and (iii) conversion of outstanding convertible equity?
  • How many weighted average common shares were outstanding in the past 3 fiscal years, as used in the computation of basic EPS?

Equity Grant Activity:

  • What is the total number of time-vesting options/SARs and full value awards granted in the past 3 fiscal years?
  • What is the number of performance-based options/SARs that vested in the past 3 fiscal years?
  • What is the total number of performance-based full value awards earned in the past 3 fiscal years?

Shares Reserved and Outstanding under Equity Compensation Programs:

  • How many shares are reserved under the proposed new plan or pursuant to the plan amendment?
  • How many shares remain available for grant under all equity compensation plans?
  • How many shares are subject to outstanding awards?

Disclosure Pendulum May Start Swinging Back

During the last decade, I have been continuously amazed with the increasing level of public company regulation.  The general direction of the Sarbanes-Oxley Act and the Dodd-Frank Act, and naturally the SEC rules implementing these acts, has always been more and more disclosure (the more granular and detailed — the better).  It seemed like the disclosure pendulum was swinging higher and higher towards overregulation and that it would never go back.  But the report on public company disclosure issued by the SEC on December 20, 2013, as mandated by the JOBS Act, gives a lot of hope that the disclosure pendulum may eventually start swinging back. 

This Report on Review of Disclosure Requirements in Regulation S-K, which largely follows the concepts outlined by SEC Chair Mary Jo White in her October speech before the National Association of Corporate Directors, recommended to Congress a comprehensive review of SEC disclosure rules and forms focusing on the following potential areas:

  • modernizing and simplifying Regulation S-K requirements in a manner that reduces the costs and burdens on companies while still providing material information;
  • eligibility for further scaling of disclosure requirements and definitional thresholds for smaller reporting companies, accelerated filers and large accelerated filers;
  • evaluating whether Industry Guides still elicit useful information and conform to industry practice and trends;
  • reviewing financial reporting requirements of Regulation S-X and financial statement disclosure requirements of Regulation S-K (e.g., annual and quarterly selected financial data disclosure and the ratio of earnings to fixed charges); and
  • disclosure requirements contained in SEC rules and forms (e.g., Forms 10-Q and 8-K).

The Staff provided detailed guidance on its suggested review of Regulation S-K, which would address the following issues:

  • principles-based approach as an overarching component of the disclosure framework (e.g., using a disclosure model of current MD&A requirements) (which may have an unintended consequence of leading to more disclosure rather than less);
  • current scaled disclosure requirements and whether further scaling would be appropriate for emerging growth companies or other categories of issuers;
  • filing and delivery framework based on the nature and frequency of the disclosures (e.g., a “core” disclosure or “company profile” filing with information that changes infrequently, periodic and current disclosure filings with information that changes from period to period, and transactional filings that have information relating to specific offerings or shareholder solicitations); and
  • readability and navigability of disclosure documents (e.g., the use of hyperlinks) as well as replacing quantitative thresholds (e.g., Item 103 (Legal Proceedings), Item 404 (Transactions with Related Persons, Promoters and Certain Control Persons) and Item 509 (Interests of Named Experts and Counsel) with general materiality standards.

In addition to these issues, the Staff identified the following specific areas of Regulation S-K disclosure that could benefit from further review:

  • risk-related requirements, such as risk factors, legal proceedings and other quantitative and qualitative information about risk and risk management, with potential consolidation into a single requirement;
  • relevance of current requirements for the description of business and properties;
  • corporate governance disclosure requirements (to confirm that the information is material to investors);
  • executive compensation disclosure (to confirm that the required information is useful to investors);
  • offering-related requirements (in light of the changes in offerings and the shift from paper-based offering documents to electronically-delivered offering materials); and
  • exhibits to filings (to confirm whether the required exhibits remain relevant and whether other documents should be added).

I cannot wait for the SEC to start proposing rules implementing these suggestions and creating a more effective disclosure mechanism that would work for the 21st century.   

 

NASDAQ Proposal to Amend its Independence Standards for Compensation Committee Members Is Effective

Last week we blogged that NASDAQ proposed to amend its independence standards for compensation committee members, which amendments would align NASDAQ’s approach to compensation committee independence with that employed by the NYSE.   On December 11th, the SEC published a notice of filing and immediate effectiveness of the proposed rule change. Companies are required to comply with the compensation committee independence rules by the earlier of the date of their first annual meeting after January 15, 2014, or October 31, 2014.

NASDAQ Proposes to Align its Independence Standards for Compensation Committee Members with the NYSE’s Approach to Such Standards

On November 26, 2013, The NASDAQ Stock Market LLC proposed to amend its listing rules on compensation committee composition (Rule 5605(d)(2)(A) and IM-5605-6) to replace the prohibition on the receipt of compensatory fees by compensation committee members with a requirement that a board of directors instead consider the receipt of such fees when determining eligibility for compensation committee membership.  NASDAQ cited the feedback that it had received from listed companies as the reason for these changes.  The proposed rules are almost identical to the NYSE’s rules related to compensation committee independence and, if adopted, would remove the anomaly of NASDAQ listing rules being more stringent than NYSE rules.

The proposed Rule 5605(d)(2)(A) states that in affirmatively determining the independence of any compensation committee member, the board must consider all factors specifically relevant to determining whether a director has a relationship to the company which is material to that director’s ability to be independent from management in connection with the duties of a compensation committee member, including, but not limited to:

  • the source of compensation of such director, including any consulting, advisory or other compensatory fee paid by the company to such director; and
  • whether such director is affiliated with the company, a subsidiary of the company or an affiliate of a subsidiary of the company.

In IM-5605-6, NASDAQ proposes to clarify that when considering the sources of a director’s compensation in determining compensation committee member independence, the board should consider whether the director receives compensation from any person or entity that would impair the director’s ability to make independent judgments about the company’s executive compensation, including compensation for board or board committee services. 

The approach to the affiliation prong of the independence analysis is not significantly changed in the proposed rules.  However, NASDAQ proposes to revise IM-5605-6 to explain that the board should consider whether the affiliate relationship places the director under the direct or indirect control of the company or its senior management, or creates a direct relationship between the director and members of senior management, in each case of a nature that would impair the director’s ability to make independent judgments about the company’s executive compensation.

Companies are required to comply with the compensation committee composition aspects of the NASDAQ rules by the earlier of their first annual meeting after January 15, 2014, or October 31, 2014.  NASDAQ intends to implement the proposed changes before companies suggest changes to board and committee composition in connection with their 2014 annual meetings.

Should Pay Ratio Disclosure Be “Furnished” or “Filed”?

In the recently proposed pay ratio rules, the SEC acknowledged that some commenters had suggested that pay ratio information should be deemed “furnished” and not “filed” for purposes of the Securities Act of 1933 and Securities Exchange Act of 1934, and no commenters had asserted that pay ratio disclosure should be “filed.”[1]  However, the SEC rejected these suggestions based on an extremely literal reading of Section 953(b) of the Dodd-Frank Act, which mandates the SEC to amend Item 402 of Regulation S-K to require disclosure of the pay ratio in any filing of the issuer described in Item 10(a) of Regulation S-K.  The SEC concluded that “the use of the word ‘filing’ in Section 953(b) is consistent with the disclosure being filed and not furnished” and proposed that “the pay ratio disclosure would be considered “filed” for purposes of the Securities Act and Exchange Act and, accordingly, would be subject to potential liabilities under such acts.”[2]  For additional information about the proposed pay ratio rules, see our September blog post.

 Information Disclosed in a Filing Does not Have to be Filed with the SEC

 I believe the SEC gave disproportionate weight to the use of the word “filing” in Section 953(b).  “Filings” described in Item 10(a) of Regulation S-K include, without limitation, registration statements under the Securities Act and Exchange Act, annual and other reports under Sections 13 and 15(d) of the Exchange Act, and proxy and information statements under Section 14 of the Exchange Act.  However, some of these filings include disclosures that are considered “furnished” and “not filed”.   For example, a current report on Form 8-K is considered a “filing” described in Item 10(a) of Regulation S-K.  However, information included in a Form 8-K pursuant to Item 2.02 (Results of Operations and Financial Condition) or Item 7.01 (Regulation FD Disclosure) is not “deemed to be ‘filed’ for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section, unless the registrant specifically states that the information is to be considered “filed” under the Exchange Act or incorporates it by reference into a filing under the Securities Act or the Exchange Act.”[3]  Therefore, it seems that the legislative mandate to disclose the pay ratio in any filing described in Item 10(a) of Regulation S-K does not mean that such disclosure cannot be afforded the furnished status.  I believe, Section 953(b) of the Dodd-Frank Act only prescribes the type of documents in which pay ratio disclosure should appear and does not dictate whether such disclosure should be furnished or filed.  

 The Proper Response is the Ballot, not Litigation Challenging the Disclosure

 The proposed pay ratio rules are very flexible and allow a registrant to use (i) a methodology that uses reasonable estimates to identify the median and (ii) reasonable estimates to calculate the annual total compensation or any elements of total compensation for employees other than the PEO. Moreover, in determining the employees from which the median is identified, the registrant may use not only its total employee population, but also statistical sampling or other reasonable methods.  The ability to use various estimates and statistical sampling for a complex analysis required by the proposed pay ratio rules leads to potentially subjective disclosure that may be difficult to verify and that should not serve as potential grounds for shareholder litigation.    

 In contrast, the SEC views the flexibility of identifying the median and the ability to use reasonable estimates as arguments against the pay ratio disclosure being furnished.  The SEC believes that the proposed transition periods, flexibility of identifying the median and the ability to use estimates should mitigate registrants concerns about compiling and verifying the pay ratio disclosure.”[4]  Such argument contradicts the SEC’s original rationale for granting other compensation-related information “not filed” status. In1992, the SEC issued Release No. 33-6962, Executive Compensation Disclosure, which adopted amendments to the executive officer and director compensation disclosure requirements (the “1992 Release”).  The 1992 Release recognized that the newly adopted Compensation Committee Report on Executive Compensation and Performance Graph raised significant concerns about the potential for litigation and increased an issuer’s exposure to liability with respect to these disclosures.  To accommodate these concerns, the SEC stated that the information required by the Compensation Committee Report on Executive Compensation and Performance Graph “shall not be deemed to be ’soliciting material’ or to be ’filed’ with the Commission or subject to Regulations 14A or 14C …, or to the liabilities of Section 18 of the Exchange Act …, except to the extent that the registrant specifically requests that such information be treated as soliciting material or specifically incorporates it by reference into a filing under the Securities Act or the Exchange Act.”[5] 

 The SEC’s reasoning in connection with the “not filed” status of the Compensation Committee Report was that “[i]f shareholders are not satisfied with the decisions reflected in the report, the proper response is the ballot, not resort to the courts to challenge the disclosure.”[6]  This same reasoning should apply to pay ratio disclosures.  Instead of treating the disclosure that most companies will base on subjective estimates and statistical sampling as “filed” and thus subject it to the liability provisions of the Exchange Act and Securities Act, this disclosure should be afforded the “furnished” status and shareholders should use voting as the venue for objecting to a specific ratio.  

 It will be interesting to see whether after the comment process the final SEC release would still support the “filed” status of pay ratio disclosure.  

 


 

[1] See Release No. 33-9452, p. 75 and Note 138.

[2] See id at p. 75.

[3] See Form 8-K, General Instruction B.2.

[4] See Release No. 33-9452, pp 75-76.

[5] See 1992 Release, Item 402(a)(9).  Both the Compensation Committee Report and Performance Graph have retained this “not filed” status in SEC Regulation S-K. See Item 402(e)(5), Instructions to Item 407(e)(5) and Item 201(e), Instruction 8 of Regulation S-K.

[6] See id.

Proposed Pay Ratio Disclosure – Delicate Balancing Act Between Congressional Mandate and Practical Implementation

On September 18, 2013, the SEC proposed the long-awaited and feared pay ratio rules.  The proposed rules embodied in the new Item 402(u) of Regulation S-K implement the mandate of Section 953(b) of the Dodd-Frank Act to disclose the ratio of the median of annual total compensation of all employees (excluding the CEO) to the annual total compensation of the CEO. 

In the proposed rules, the SEC provided registrants with a lot of flexibility in terms of various calculations that should be performed.   However, the SEC conceded that permitting registrants to select a methodology for identifying the median, rather than prescribing a specific methodology, could enable a registrant to “alter the reported ratio to achieve a particular objective with the ratio disclosure, thereby potentially reducing the usefulness of the information.”

Continue reading “Proposed Pay Ratio Disclosure – Delicate Balancing Act Between Congressional Mandate and Practical Implementation”