U.S. Chamber provides input on SEC inquiry into executive pay

C should review and reconsider the disclosure requirements for perquisites (perks) and consider exempting certain expenses, such as personal security, from perk disclosure.3.    The influence of proxy advisory firms in corporate decisions and executive pay disclosures should be examined.4.    While supporting the repeal of Section 953(b) of the 2010 Dodd-Frank Act, known as the “pay ratio” rule, the SEC should address compliance challenges faced by businesses under the final pay ratio rule.5.    Changes to the SEC’s 2022 rule implementing Section 953(a) of the Dodd-Frank Act (the “pay versus performance” rule) should adopt a more principles-based approach.6.    A reassessment of the 2016 proposal to implement Section 956 of the Dodd-Frank Act, which deals with incentive compensation, is needed.7.    The SEC’s rule implementing Section 954 of the Dodd-Frank Act (the “clawback” rule) should be revisited to reflect companies’ clawback policies enacted since 2010.8.    Tailoring of executive compensation disclosure requirements should be done for small issuers like smaller reporting companies (SRCs) and emerging growth companies (EGCs).

The complexity of executive compensation disclosures has increased over the years due to various SEC rulemakings, staff interpretations, and Congressional mandates. These layers of requirements have made the disclosures lengthy and intricate, without clear aggregate analysis on their effectiveness in providing investors with material information. The 2006 rules on executive compensation aimed to offer investors a complete view of compensation for top executives. However, the evolving interpretations of CD&A have led to an overwhelming amount of information provided by companies.

The enactment of the Dodd-Frank Act in 2010 introduced new executive compensation rules, adding to the complexity of existing SEC requirements. The Chamber has previously highlighted the confusion caused by these mandates when disclosed alongside CD&A and extensive tabular disclosures in proxy materials.

In conclusion, as the SEC reviews and potentially reforms public company executive compensation disclosure, it is crucial to reassess current requirements under Regulation S-K, review perk disclosure requirements, examine the role of proxy advisory firms, address compliance challenges under existing rules, adopt a more principles-based approach, reassess proposals on incentive compensation, revisit clawback rules, and tailor disclosure requirements for smaller issuers. These recommendations aim to provide investors with clear and decision-useful information on executive compensation, ultimately benefiting companies and the public markets.