Proposed federal rules would require public companies to disclose how the pay of their top executives lines up with a company’s financial performance. Before that happens, the Securities and Exchange Commission said Thursday that it is reopening the comment period on the disclosure rules.
“If adopted, this proposed rule would strengthen the transparency and quality of executive compensation disclosure,” SEC Chair Gary Gensler said. In reopening the comment period, he added, “we are considering whether additional performance metrics would better reflect Congress’s intention in the Dodd-Frank Act and would provide shareholders with information they need to evaluate a company’s executive compensation policies.”
The Dodd-Frank Act became law in 2010, and in 2015, the SEC proposed rules to implement the act’s “pay versus performance” requirement, but then things stalled. The SEC said it is re-opening the comment period now in part because of changes in executive compensation practices that have occurred since 2015.
“Financial incentives drive how executives perform in their role as fiduciaries to companies and their shareholders. Understanding what those incentives are and whether they are actually working — that is, if and how they link to company performance — is critical for investors in evaluating a company’s compensation practices,” Commissioner Allison Herren Lee said in a statement.
Three of the commissions voted for reopening comments. In dissent, Commissioner Hester M. Pierce stated: “While I agree that we should move forward on this nearly 12-year-old Dodd-Frank rulemaking mandate, I do not agree with the approach taken in this release. Instead of fixing critical shortcomings of the 2015 Proposing Release, the re-opening release doubles down on a flawed proposal and raises the prospect of additional disclosure requirements.”
The public comment period will remain open for 30 days following publication in the Federal Register. A PDF is available for viewing now.
