Executive Compensation SEC Proposed Rules

July 22, 2015 | Comments Off on Executive Compensation SEC Proposed Rules
Posted by John A. Aiello

On Tuesday, July 21, 2015, an article appeared in the Wall Street Journal entitled “CFOs Prep for SEC PayRatio Rules.”  Among other things, the article focuses on the potential complexities confronted by a public company seeking to comply with the proposed rule which would require the disclosure in the proxy statement and 10-K of the CEO’s annual total compensation in relationship to the median annual compensation of all other employees of the company.  Significant resources may be required to comply with these proposed CEO pay ratio rules.  Although the Wall Street Journal article focused on CEO pay ratio rules, it is worth noting other rules proposed by the SEC which would require disclosure of how executive compensation actually paid relates to the company’s financial performance.  Compensation committees will be inclined to spend greater time and effort in structuring compensation programs centered around performance goals and performance metrics to best assure a reasonable relationship between executive compensation paid and the company’s financial performance.

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