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SEC Releases Additional Guidance on CEO Pay Ratio Disclosure

The SEC recently published Compliance and Disclosure Interpretations (“C&DIs“) relating to the CEO pay ratio disclosure rule. This disclosure rule under Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act requires a public company to disclose the ratio between its CEO’s annual compensation and the median annual compensation of all other employees. The new C&DIs include guidance on the selection of an appropriate alternative compensation measure and clarify that if an alternative compensation measure is utilized to determine the median employee, the time period utilized does not have to be a full annual period. Moreover, the time period utilized does not have to include the date on which the employee population was determined. View our prior post on the SEC’s adoption of the CEO pay ratio disclosure rule here. View the full text of the C&DIs here.

Several Federal Agencies Issue Revised Proposed Rule Prohibiting Incentive Compensation for Excessive Risk Taking by Covered Financial Institutions

Several federal agencies, including the SEC, issued a joint revised proposed rule to implement Section 956 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Proposed Rule”), which prohibits incentive-based compensation that encourages inappropriate risks by certain financial institutions. The Proposed Rule divides covered institutions into three tiers based on their average total consolidated assets. Although many aspects of the Proposed Rule are similar to the rule proposed in 2011, there are a few key differences. These differences include a new definition of incentive-based compensation that would not be considered to appropriately balance risk and rewards, a new recordkeeping requirement regarding the structure of incentive-based compensation, new requirements for deferral of incentive-based compensation, downward adjustments and clawbacks, and requirements for the structure of the institution’s compensation committee. The Proposed Rule is available here.

SEC Adopts Dodd-Frank Act Pay Ratio Disclosure Rule

The U.S. Securities and Exchange Commission (the “SEC“) adopted its much-anticipated final rule under Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The rule requires a public company to disclose (1) the median of the annual total compensation of all its employees, except its chief executive officer (“CEO“); (2) the annual total compensation of its CEO; and (3) the ratio of the compensation of its CEO to the median compensation of its employees. Under the rule, a company would only be required to calculate median employee compensation once every three years and generally must include all employees, including part-time, seasonal, and non-U.S. employees. Although the company may choose among methods for calculating compensation, it must disclose the method it uses and must use the same method for calculating both CEO and employee compensation. The rule is effective for the first fiscal year beginning on or after… Continue Reading

SEC Publishes Analysis Related to Proposed Pay-Ratio Disclosure Rules

In 2013, the U.S. Securities and Exchange Commission (the “SEC”) issued proposed rules implementing Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which requires publicly traded companies to disclose (a) the median of the annual total compensation of all employees of the company other than the chief executive officer, (b) the annual total compensation of the company’s chief executive officer, and (c) the ratio of (a) to (b) (the “Pay Ratio”). The Pay Ratio disclosure would be required in any annual report, proxy statement, or registration statement that requires executive compensation disclosure pursuant to Item 402 of Regulation S-K. In response to comments received with respect to the Pay-Ratio proposed rules, the SEC’s Division of Economic and Risk Analysis (“DERA”) published an analysis on June 4, 2015, which considers the potential effects on the Pay Ratio of excluding different percentages of certain categories of employees, such… Continue Reading

SEC Proposes Rules Requiring New Pay-for-Performance Disclosure

On April 29, 2015, the U.S. Securities and Exchange Commission (the “SEC“) voted to propose rules under Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, requiring companies to disclose the relationship between executive compensation actually paid and the financial performance of the company.  This new “pay-for-performance” disclosure (the “Disclosure“) would include information for the company and peer group companies set out in a table that is incorporated into the proxy or other information statements in which executive compensation disclosure is required.  The Disclosure would present (a) executive compensation actually paid for the principal executive officer (i.e., the total compensation as disclosed in the proxy statement’s summary compensation table (the “SCT“), with adjustments for pension and equity award amounts); (b) the average compensation actually paid to the remaining named executive officers identified in the SCT; and (c) the total annual shareholder return of the company and its… Continue Reading

SEC Proposed Rule Requiring CEO Pay Ratio Disclosures

As mentioned before, the SEC recently released a proposed rule that would require public companies to disclose the median annual total compensation of all their employees and the ratio of such median to the annual total compensation of their CEO.  This requirement is commonly known as the “pay ratio disclosure” requirement.  You can find our recent alert discussing the proposed rule here.

Twitter Publicly Announced it Privately Applied to Go Public

On Thursday, Twitter announced — by tweet, of course — that it has filed to go public. That is, Twitter submitted a  S-1 filing to the SEC for a planned IPO.  It did so confidentially, as allowed under the JOBS Act.  Twitter revealed this to the world 3 days ago through its own Twitter account in a brief tweeter…and minutes later, casually tweeted, “Now, back to work.” Twitter’s IPO plans are sure to be watched closely by the world.  Facebook going public was, of course, an enormous event filled with business and legal questions and activities.

SEC Clarifies the Application of Regulation FD to Social Media Disclosures

Since the announcement of the investigation by the SEC of the CEO of Netflix, Inc. for a July 2012 Facebook post celebrating a company milestone, there has been considerable uncertainty as to whether companies can use social media outlets, like Facebook and Twitter, to communicate with investors without violating Regulation Fair Disclosure (“Regulation FD”). On April 2, 2013, the SEC addressed this uncertainty by issuing a Report of Investigation (the “Report”) in which it clarified the rules applicable to companies releasing information to the public through social media. The Report indicates that the SEC is amenable to the increased use of social media outlets by companies while also reinforcing the applicability of Regulation FD to any such disclosures. Regulation FD contains the federal securities regulations requiring public companies to disclose material, non-public information to investors in a manner reasonably designed to achieve effective broad and non-exclusionary distribution to the public… Continue Reading

Final SEC Rule Regarding Listing Standards for Compensation Committees and Amendment to Proxy Disclosure Rules

The SEC issued a Final Rule, as required by the Dodd-Frank Act, that requires securities exchanges to adopt listing standards to address the independence of compensation committee members and the committee’s authority to retain compensation advisers, consideration of the independence of compensation advisers, and responsibility for the appointment, compensation and oversight of the work of any compensation adviser. Each national securities exchange and national securities association must provide the SEC its proposed rule changes that comply with the Final Rule no later than 90 days after the Final Rule’s publication in the Federal Register. Each national securities exchange and national securities association must have final rules or rule amendments that comply with the Final Rule approved by the SEC no later than one year after publication in the Federal Register. Once an exchange’s new listing standards are in effect, a listed company must meet the standards in order for its… Continue Reading

JOBS Act FAQs Regarding Disclosure Exemption for Emerging Growth Companies

As previously reported, the JOBS Act exempts an “emerging growth company” from certain executive compensation reporting requirements. Recent SEC FAQs provide additional guidance regarding the scaled down reporting requirements. An emerging growth company may amend its registration statement that was initially filed prior to April 5, 2012 to provide the scaled disclosure by either a pre-effective amendment to a pending registration statement or in a post-effective amendment. In addition, an emerging growth company that completed its initial public offering after December 8, 2011 and prior to April 5, 2012 may file its next periodic report using the scaled disclosure provisions. Finally, an emerging growth company may decide to comply with some of the scaled disclosure provisions and some of the regular disclosure requirements if it does not want to comply with all of the scaled disclosure provisions. The SEC’s FAQs can be found here.


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