The SEC announced on August 25, 2022 that in accordance with the Dodd-Frank Act it had altered its rules regarding the disclosure of pay vs. performance information by registrants. The new rules are designed to allow investors to see how high-ranking executives are paid in relation to the company’s overall performance and profit. Becoming effective on October 11th, the new rules will apply to any company whose fiscal year disclosures end on or after December 16, 2022. The new rules state that the company must report the compensation, total company and peer shareholder return, and overall company financial performance for at least the past 5 fiscal years. Additional statistics, including at least three financial metrics will also be required, such as summary compensation total for PEOs and NEOs, compensation actually paid to PEOs and NEOs, total shareholder return and peer group total shareholder returns based on a $100 initial investment, and net income. Special exemptions have been made for foreign private issuers, Smaller Reporting Companies, registered investment companies, Emerging Growth Companies, and companies that recently went public. Smaller Reporting Companies only have to report their past 3 fiscal years and are exempt from submitting additional fiscal data, companies that recently went public only need to submit relevant information for the period since they went public. To best acquiesce with these new requirements, companies should begin compiling relevant fiscal data for the previous years now, make estimations for the 2022 fiscal data in preparation, and determine which financial metrics to submit as part of the information.
