Divergent Perspectives Emerge at SEC Executive Comp Roundtable

On June 26 in Washington, D.C., the U.S. Securities and Exchange Commission (SEC) hosted a roundtable meeting on executive compensation proxy disclosure, with panelists considering whether — and to what extent — the current requirements for public companies should be reformed.

In their opening remarks, Republican majority chair Paul Atkins and commissioners Hester Peirce and Mark Uyeda highlighted the disconnects between the original intent of executive compensation disclosure rules and how they are applied today.

A recurring theme was the challenge of balancing the need for disclosures that are meaningful to investors with the compliance burden placed on public companies. The concept of “materiality” was central to the discussion, with Peirce suggesting some current disclosures serve broader policy goals rather than directly supporting investor decision-making.

Several disclosure requirements from the 2010 Dodd-Frank Act — such as CEO pay ratio, pay versus performance and clawback rules — drew attention, indicating the SEC may be open to re-evaluating how these statutory mandates have been implemented. Other topics raised included the complexity, length and clarity of current compensation disclosures, with a particular focus on the difficulty of defining and valuing executive perquisites.

Potential Challenges Ahead?

Corporate issuers and their advisors generally supported a scaled-back, principles-based approach to the proxy statement’s Compensation Discussion and Analysis (CD&A) section, while investor representatives called for more standardized, targeted disclosures through rules-based frameworks. These opposing perspectives underscored potential hurdles in reaching consensus.

Other key issues discussed were:

CEO pay ratio. Companies highlighted the challenges of information gathering in preparing the ratio and indicated it rarely is a topic of focus during engagement with investors. Some investors noted the value of the CEO pay ratio as insight into internal inequity (and, potentially, workforce engagement), particularly by being able to track how numbers change over time.
Pay versus performance (PVP). Companies and advisors highlighted the material costs involved in preparing the PVP analyses, adding the analyses often were confusing and risked being misleading, given how the SEC defined the term “compensation actually paid.” It was noted that PVP questions from investors are not common, and most companies often use their own approach to analyzing in-cycle and compensation paid analyses to inform decisions rather than “compensation actually paid.”
Perquisites/all other compensation. Companies stated that including perquisites in the proxy statement’s Summary Compensation Table (SCT) total compensation calculation can be highly distracting as well as expensive and challenging to prepare. One particular concern was executive security is widely accepted as a cost of doing business, even though perquisite rules require their disclosure as compensation. One commenter noted companies can be punished by proxy advisors for excessive pay when these security costs are included in the SCT.
Number of named executive officers (NEOs). Views varied considerably among panelists, with companies having a bias toward fewer NEOs (perhaps just the chief executive and chief financial officers). Investors suggested the required inclusion of leaders of large business units would be useful information to add to an expanded list of NEOs.

Where Agreement Actually Occurred

Despite differences among stakeholders, there was alignment on several issues:

Simplifying disclosures. There was support for making disclosures more efficient, clear and relevant to better serve both companies and investors.
Clawbacks. While many agreed executives should return unearned pay, many thought the original statute was too broad. With the clawback provisions still relatively new, panelists said it is too early to evaluate their full impact.
Stakeholder engagement. Panelists acknowledged the introduction of “say on pay” regulation helped provide a forum for investor feedback and dialogues that enhanced their understanding of pay programs.
Improving committee insight. For investors, current disclosures do not adequately explain the compensation committee’s decision-making related to business context, performance targets and actual outcomes.
XBRL reporting. Panelists supported the use of XBRL (eXtensible Business Reporting Language) to improve data standardization and enable easier pay-data analysis to inform voting decisions.

Technical Comments Focused on Confusion, Redundancy

Technical comments zeroed in on equity — the largest, yet often most difficult component of executive pay to understand — and challenges in tracking awards through lifecycle payout.

The panel discussions focused on:

Concerns that SCT totals receive disproportionate attention from the press and pay critics even though a majority of disclosed equity pay value may never be realized by executives.
Concerns that reconciling equity information across plan-based awards, outstanding equity and vested awards can be challenging. They do not necessarily link directly to the PVP table, and understanding what an executive actually earned from equity remains difficult.

Suggestions focused on how the SEC might alter their tables to separately depict target pay from actual pay while potentially streamlining the number of tables.

SEC May Fast-Track New Rules

Historically, the SEC has moved slowly, allowing time for comment and implementing distant effective dates. But some speakers suggested delays between proposed regulations and publication of final regulations cause the process to be rushed before an upcoming presidential election. Also, they noted the economic analyses done early in the process may have underestimated the costs of compliance.

Atkins requested that comments from interested parties be submitted within a few weeks, suggesting the SEC may act more quickly on the non-Dodd-Frank rules. Proposed rules could appear later this year, with final rules potentially adopted in 2026. The commission retains discretion as to when proxies would then comply with a new disclosure regime, so it is possible new rules would not be in place for proxies filed after the end of 2026.

Changes to rules implementing Dodd-Frank provisions (like CEO pay ratio, PVP and clawbacks) may follow a longer path. On the other hand, reforms around executive perquisite disclosures, which fall outside statutory mandates, could be tackled on an accelerated basis.

Editor’s Note: Additional Content

For more information and resources related to this article, see the pages below, which offer quick access to all WorldatWork content on these topics: