Defining Issues | January 2022



SEC reopens pay vs performance disclosure proposal

Comment period on 2015 proposal to implement Section 953(a) of Dodd-Frank Act reopened with additional questions.

In April 2015, the SEC proposed rules that would have required registrants to disclose the relationship between executive compensation and the financial performance of the registrant. The SEC is now revisiting the proposal and reopening the comment period. 


  • Public companies (exceptions for foreign private issuers, emerging growth companies and registered investment companies)

Relevant dates

  • April 29, 2015 – Proposal issued
  • January 27, 2022 – Comment period reopened 
  • 30 days after publication in Federal Register – Comments due on proposed rule 

Key impacts:

In 2015, the SEC proposed a rule that would have implemented certain provisions of the Dodd-Frank Act. The rule was never finalized.

Overview of 2015 proposal

  • Require disclosures of executive compensation and a measure of financial performance (total shareholder return) in a tabular format for each of the five most recently completed fiscal years.
  • Require description in narrative or graphical format to show the relationship between the executive compensation and the total shareholder return as well as companies’ peer groups. 
  • The determination of compensation paid would require inclusion of service costs portion of pension benefits and the fair value of equity awards on their vesting dates.
  • Executives to be included in the disclosures would include the principal executive officer (PEO) and non-PEO named executive officers (NEOs).  
  • Could require the need to update systems to capture the new information required under this proposed rule. 

Key concerns expressed on 2015 proposal

  • Using total shareholder return as the sole measure of financial performance and whether a ‘one size fits all’ benchmark is appropriate for all companies.
  • Potential complexity and burden in the calculation of the fair value of equity awards at vesting dates.
  • Additional burdens these disclosures could have on smaller registrants.
  • Read the KPMG comment letter here.



On January 27, 2022, the SEC reopened the comment period for this proposal, seeking incremental feedback.  

In the new release, the Commission noted it is considering requirements to disclose the following measures of performance in addition to total shareholder return:

  • Pre-tax net income 
  • Net income 
  • A company-selected measure (the most important performance measure from the company’s perspective). 

Select additional areas for feedback sought from 2022 comment period:

  • Whether the disclosure of additional financial performance measures (including those noted above) beyond total shareholder return should be required.
  • Whether there are other measures of performance that should be mandated in addition to, or instead of, pre-tax net income and net income.
  • How the disclosure of the ‘Company-Selected Measure’ should be defined.
  • Whether disclosure of the five most important performance measures used to determine executive compensation (in ranked order) should be required.
  • Whether simplifications or other adjustments to the methods used to determine pension benefits and fair value of options at the vesting date could reduce complexity and still provide useful information. 

The SEC has posted a fact sheet outlining the background and next steps related to this proposal. 

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