On Aug. 25, the U.S. Securities and Exchange Commission (SEC) adopted pay versus performance disclosure rules that will require public companies to provide extensive information that is intended to demonstrate the relationship between the executive compensation that is actually paid by a company and the company’s overall financial performance. The adoption comes 12 years after Congress directed the SEC to implement pay versus performance disclosure rules pursuant to §953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. According to the SEC, the rules are intended to provide investors with more transparent, readily comparable, and understandable disclosure of a company’s executive compensation so that investors may better assess a company’s executive compensation program when making voting decisions.

Public companies must comply with the rules (which became effective on Oct. 11) in proxy and information statements that are required to include executive compensation information pursuant to Item 402 of Regulation S-K for fiscal years ending on or after Dec. 16. The rules allow for scaled disclosure from smaller reporting companies (SRCs) and do not apply to foreign private issuers, registered investment companies, or emerging growth companies.

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