The CHRO Association submits these comments in response to the rule proposal issued by the Securities and Exchange Commission (SEC) regarding the simplification of filer status for public companies (“Proposal”). We appreciate the SEC’s ongoing efforts to reform public company reporting requirements and are pleased to provide our views on the Proposal.
The CHRO Association is a public policy advocacy organization that represents the most senior human resource officers (CHROs) in nearly 400 of the largest corporations across industries doing business in the United States and globally. Collectively, these companies employ more than 10 million employees in the United States, nearly nine percent of the private sector workforce, and 20 million employees worldwide. Approximately two-thirds of the Association’s members are federal contractors, including those operating within the defense industry.
Under current SEC rules, based upon metrics such as public float and annual revenue, issuers may qualify as a 1) Large accelerated filer (LAF); 2) Accelerated filer (AF); 3) Non-accelerated filer (NAF); 4) Smaller reporting company (SRC); or 5) Emerging growth company (EGC). Each status confers a specific regulatory framework upon issuers. Many companies qualify as more than one type of filer; for example, the Proposal notes that in 2024 NAFs that were also SRCs or EGCs (or both) accounted for 51.9% of all issuers.
The current filer status system – and its potential to create confusion and uncertainty particularly amongst smaller issuers – has been the subject of criticism for some time. In 2019, Commissioner Peirce remarked that “the process of determining whether a company is an SRC and a non-accelerated filer, or an SRC and an accelerated filer, or outside of both categories is so complicated that even we at the SEC need diagrams to figure it out.” Commissioner Uyeda has similarly remarked that the SEC needs to “re-align” filer status categories to better reflect public markets today.
The Proposal would effectively consolidate the current filer status system down to two categories: Large accelerated filers and non-accelerated filers. The accelerated filer and smaller reporting company status would be eliminated. Emerging growth company status would still remain, however most regulatory accommodations currently available to EGCs would become available to NAFs under the Proposal.
Large accelerated filers / non-accelerated filers
The Proposal seeks to raise the public float threshold that triggers LAF status from the current $700 million to $2 billion. Additionally, the “seasoning” period that determines when an issuer becomes a large accelerated filer would be extended from 12 months to 60 months after the date on which the issuer becomes subject to Exchange Act reporting requirements. In other words, a company that has recently completed an initial public offering would not become a large accelerated filer until a minimum of five years after they have gone public. Any issuer that does not qualify as a large accelerated filer under the Proposal would be treated as a non-accelerated filer.
Of particular interest to the CHRO Association are the scaled reporting requirements (including those currently applicable to EGCs and SRCs) that would be extended to all non-accelerated filers under the Proposal. These include:
- Exemptions from certain executive compensation disclosure requirements, including compensation discussion and analysis (CD&A), pay ratio, pay versus performance, and certain tabular disclosure regarding executive compensation;
- Exemption from the requirement to hold advisory votes on executive compensation (“say on pay”);
- Tailored business disclosure including a requirement to provide management discussion and analysis (MD&A) covering two years (rather than the typical three years), exemptions from risk factor disclosure, related person transaction disclosures, and resource extraction disclosure, amongst others;
- The ability to provide two years of audited financial statements rather than the typical three years for other issuers.
The Proposal would substantially expand the number of companies that qualify as NAFs. The SEC estimates that over 1,700 companies would be newly eligible NAFs under the Proposal, the vast majority of which currently file as large accelerated filers or accelerated filers.
The SEC is right to re-examine the lines of demarcation in its rules that determine whether issuers should be eligible for tailored rules based upon their size relative to the rest of the public markets.
The current threshold that determines non-accelerated filer status (<$75 million in public float) was first established in 2005. SRC criteria were only recently updated in 2018 to include companies with a public float less than $250 million or annual revenue less than $100 million, subject to certain limitations. When Congress adopted the JOBS Act in 2012, it determined that a company could file as an EGC if it had annual revenue under $1 billion (adjusted for inflation over time).
To put this into perspective, in 2005 when the non-accelerated filer definition was created, the total market capitalization of the U.S. stock market was roughly $17 trillion, compared to over $75 trillion today. The equity markets have similarly had a roughly 4x increase since the JOBS Act was passed 14 years ago.
Markets have evolved the concept of what constitutes a “small” issuer over time, but regulation has not kept up. In fact, over the last twenty years, corporate disclosure – specifically executive compensation disclosure – has only grown in terms of cost and complexity. If adopted, the Proposal will help many smaller or newly public companies dedicate more resources to growth rather than burdensome reporting mandates that provide investors with little information of use.
The CHRO Association filed comments in response to the SEC’s roundtable on executive compensation disclosure in 2025, and we are pleased that a broader reform proposal to these requirements is on the SEC’s current regulatory agenda. As we wrote at the time, “executive compensation disclosure has become complex, repetitive, and difficult for investors to understand, thereby negating in large part the purpose of the disclosure.”
To be clear, we continue to strongly support the recommendations contained in our 2025 comments and changes to executive compensation and other reporting rules for all issuers. We look forward to continuing our work with the SEC as initiatives related executive compensation and Reg S-K reform move forward.
Any exemptions or tailoring of disclosure ultimately adopted would be based upon the reasoned judgment of the SEC – reached through the notice-and-comment rulemaking process – that the disclosure is not necessary for investors to make informed decisions. Companies that avail themselves of the new exemptions may receive pressure from proxy advisory firms, third-party activists, or outside consultants to continue providing disclosure that the SEC has determined is not useful for investors. However, companies should question whether such calls are based upon potential conflicts of interest or other factors rather than the actual needs of their shareholders.
The Need for Principles-Based Executive Compensation Disclosure
Several aspects of the Proposal build upon key takeaways from the SEC’s 2025 executive compensation disclosure roundtable. Chairman Atkins described the current state of disclosure as a “Frankenstein patchwork,” while Commissioner Uyeda pointed out that the purpose of executive compensation disclosure is to illuminate executive pay levels for investors – not to influence how companies determine those levels.
One analysis found that the average CD&A has grown to 10,000 words,10 while a roundtable panelist noted their CD&A has grown dramatically since 2000, from an average of five pages to over 35 pages today. Additionally, the increasing number of mandated tables and rigid definitions (such as “compensation actually paid”) has forced companies to provide supplementary explanations, exacerbating complexity rather than enhancing transparency.
Mandated tables and overly prescriptive disclosure rules constrain the ability of the company to clearly tell its pay for performance story. Force-fitting the details of compensation into a one size-fits-all series of mandated tables and narratives limits the ability of the company to convey the criteria used to assess the effectiveness of the compensation arrangements the compensation committee has adopted.
The extent to which the prescribed tables and disclosure requirements signal to investors that the standardized information reflects the deliberations and decisions of the compensation committee encourages a superficial understanding of the “what, why and how” of a company’s approach to linking executive pay to performance.
Key Provisions of the Proposal
Under the Proposal, the following scaled requirements would be made available to all NAFs:
- Exemption from the Dodd-Frank Act “pay ratio rule;”
- Exemption from the Dodd-Frank Act “pay versus performance rule;”
- Exemption from the Dodd-Frank Act’s requirement to hold advisory votes on executive compensation (“say on pay”);
- Exemption from requirement to disclose CD&A and the compensation committee report;
- Requirement for executive compensation for three named executive officers (NEOs), rather than the typical five NEOs for other issuers;
- Exemption from certain tabular disclosure, including the grants on plan-based awards table, pension benefits table, option exercises and stock vested table, and nonqualified deferred compensation table;
This is not an exhaustive list of changes that would be made for NAF reporting, however we wish to provide our views below regarding some of these topics.
Pay Ratio Disclosure
We support an exemption for NAFs to report pay ratio information under Section 953(b) of the Dodd-Frank Act, similar to the exemption that currently exists for EGCs and SRCs. No legitimate purpose exists for the collection of the data required to calculate the pay ratio disclosure rule and median employee compensation as required by the rule. The SEC’s own estimates when it adopted the final pay ratio rule in 2015 found that annual compliance costs would approach $370 million.
For all issuers, the CHRO Association continues to call for the following changes to the pay ratio rule:
- The SEC could amend the “calculation date” of median compensation to align with the employee population defined by preexisting records such as W-2s. Allowing companies to use readily available year-end tax records, rather than trying to determine employee count and compensation mid-year, would ease compliance difficulties and still fully comply with the requirements of Section 953(b).
- The SEC could also amend the pay ratio rule to allow companies to maintain their median employee benchmark for three years rather than having to recalculate the figure every year. This would mitigate the burden of having to determine median employee compensation every year while still providing an annual ratio.
Pay Versus Performance
Section 953(a) of the Dodd-Frank Act stipulates that the “pay versus performance” disclosure required of issuers:
“shows the relationship between compensation actually paid [to NEOs] and the financial performance of the issuer, taking into account any change in the value of the shares of stock and dividends of the issuer and any distributions.”
Unfortunately, when the SEC adopted the final pay versus performance rule in 2022, it elected to implement a highly prescriptive mandate that does little to help investors understand how issuers actually align executive pay with corporate performance. The statutory text of Section 953(a) does not explicitly require the types of prescriptive tabular disclosure, performance measures, or the regulatory definition of “compensation actually paid” which are all included in the 2022 rule.
A survey conducted by the CHRO Association and Society for Corporate Governance found that a majority of public companies have never been asked about the pay versus performance disclosure. Still, costs of compliance remain high – a majority of companies reported spending 20+ hours on compliance (some as high as 60+ hours) and some reported spending as much as $75,000 on outside advisors.
Accordingly, we support an exemption from this mandate for NAFs under the Proposal. For all other issuers, we continue to support alignment with the intent of Section 953(a) and a more principles-based approach by the SEC to pay versus performance.
CD&A
A survey conducted by Stanford University’s Rock Center for Corporate Governance in 2015 found that only 38% of institutional investors actually read the CD&A section of company proxies. Respondents also generally found that CD&A disclosure tends to be “overly boilerplate” and “not decision-useful.”
Since that survey was conducted, CD&A narratives have tended to only grow in size and complexity, while mandates such as pay ratio and pay versus performance have also been implemented, further muddying the executive compensation picture of companies for investors.
We support giving companies the flexibility to craft their own narrative disclosure regarding executive compensation. Accordingly, we support providing an exemption for NAFs from the current CD&A requirements in order to provide these companies with such flexibility.
Recommended Changes to NEO and Tabular Disclosure Provisions of Proposal
The current proposal would extend to NAFs the ability to disclose compensation for three NEOs (as opposed to five) and also an exemption from certain tabular disclosure requirements, listed above. However, the SEC solicits comment in the proposal as to whether additional or different regulatory accommodations should be made available to NAFs.
In light of this, the CHRO Association wishes to reiterate our recommendations made in 2025 with respect to tabular disclosure in the proxy as well as the consolidation of NEO disclosure. While the Proposal includes positive changes to current disclosure, we believe it could be improved upon in these two areas.
With respect to compensation tables, we support the consolidation of all current pay tables into two simplified tables:
Summary Compensation Table – Total Direct Compensation (Target). This table would disclose the annually awarded target compensation opportunities approved by the board for the CEO and CFO. It would include annual base salary, annual and long-term cash incentive opportunity at target, and the aggregate grant-date value of equity awards. This table would allow investors to see the total intended value of the annual compensation package for each executive as determined by the board (to provide a competitive level of pay if the targeted performance objectives are achieved).
Summary Compensation Table – Total Direct Compensation (Earned). This table would disclose the compensation actually earned or realized during the year, including annual base salary, annual and long-term cash incentives and bonuses actually earned, and the value of equity awards on the date such awards vest. It would exclude pension accruals and similar non-discretionary benefit changes unrelated to the board’s annual pay decisions.
Additionally, with regard to NEO disclosure, we support requiring disclosure only of the chief executive officer (CEO) and chief financial officer (CFO). Issuers that are currently required to disclose CEO, CFO, and top 3 NEO executive compensation find themselves in a difficult situation. “Top three” NEO compensation can vary greatly year to year and from company to company, depending upon one-time awards or organizational changes. In some years, the head of a business unit may be in the “top 3” while in other years a general counsel or chief operating officer may be in the group, making it difficult to compare compensation across companies or even within the same company.
Additionally, investors and proxy advisory firms tend to primarily focus on CEO pay when evaluating say on pay proposals or pay versus performance alignment. Disclosing compensation for executives beyond the CEO and CFO therefore does little to advance investor understanding of a company’s pay practices and can add complexity to proxy disclosures.
Smaller public issuers including SRCs have already been required for some time to only provide compensation disclosure for three executives – the CEO and the next two most highly compensated executives. We believe that a clear requirement across all issuers to simply provide CEO and CFO compensation would meet investor demand and help provide a clear picture of compensation for the top executives within a company.
Conclusion
We appreciate the opportunity to provide our views on these important topics and look forward to continuing to work with the SEC as its disclosure reform efforts move forward.
1 Proposal at 35(go back)
2 Statement at Open Meeting on Proposed Amendments to Sarbanes Oxley 404(b) Accelerated Filer Definition. Commissioner Hester Peirce (May 9, 2019) https://www.sec.gov/newsroom/speeches-statements/peirce-proposed-amendments-sox-404b-accelerated-filer-definition (go back)
3 Remarks at the Florida Bar’s 41st Annual Federal Securities Institute and M&A Conference. Commissioner Mark Uyeda (Feb. 24, 2025) https://www.sec.gov/newsroom/speeches-statements/uyeda-remarks-florida-bar-022425 (go back)
4 Proposal at 149(go back)
5 Revisions to Accelerated Filer Definition and Accelerated Deadlines for Filing Periodic Reports. Final Rule (December 21, 2005) https://www.sec.gov/files/rules/final/33-8644.pdf (go back)
6 Amendments to the Smaller Reporting Company Definition. Final Rule (June 28, 2018) https://www.sec.gov/files/rules/final/2018/33-10513.pdf (go back)
7 Proposal at 149(go back)
8 Revisions to Accelerated Filer Definition and Accelerated Deadlines for Filing Periodic Reports. Final Rule (December 21, 2005) https://www.sec.gov/files/rules/final/33-8644.pdf (go back)
9 Amendments to the Smaller Reporting Company Definition. Final Rule (June 28, 2018) https://www.sec.gov/files/rules/final/2018/33-10513.pdf (go back)
10 Preparing for Proxy Season 2022. Equilar / Donnelly Financial Solutions (November 2021) https://www.dfinsolutions.com/sites/default/files/documents/2021-11/equilar-preparing-for-proxy-season-2022-nov2021.pdf(go back)
11 2015 Investor Survey: Deconstructing Proxy Statements – What Matters to Investors. Stanford Rock Center for Corporate Governance / RR Donnelly / Equilar
https://www.gsb.stanford.edu/faculty-research/publications/2015-investor-survey-deconstructing-proxy-statements-what-matters(go back)
12 Question 13 of proposing release (Page 96) “Alternatively, are there other or new disclosure scaling or other regulatory accommodations that should be made available to NAFs?”(go back)
SEC’s Proposal to Simplify Filer Status for Public Companies: Comment from CHRO Association
More from: Ani Huang, CHRO Association
Ani Huang is the President, Policy and Practice, for the CHRO Association. This post is based on a comment letter by CHRO Association submitted to the U.S. Securities and Exchange Commission regarding the proposal to simplify filer status for public companies.
The CHRO Association submits these comments in response to the rule proposal issued by the Securities and Exchange Commission (SEC) regarding the simplification of filer status for public companies (“Proposal”). We appreciate the SEC’s ongoing efforts to reform public company reporting requirements and are pleased to provide our views on the Proposal.
The CHRO Association is a public policy advocacy organization that represents the most senior human resource officers (CHROs) in nearly 400 of the largest corporations across industries doing business in the United States and globally. Collectively, these companies employ more than 10 million employees in the United States, nearly nine percent of the private sector workforce, and 20 million employees worldwide. Approximately two-thirds of the Association’s members are federal contractors, including those operating within the defense industry.
Under current SEC rules, based upon metrics such as public float and annual revenue, issuers may qualify as a 1) Large accelerated filer (LAF); 2) Accelerated filer (AF); 3) Non-accelerated filer (NAF); 4) Smaller reporting company (SRC); or 5) Emerging growth company (EGC). Each status confers a specific regulatory framework upon issuers. Many companies qualify as more than one type of filer; for example, the Proposal notes that in 2024 NAFs that were also SRCs or EGCs (or both) accounted for 51.9% of all issuers.[1]
The current filer status system – and its potential to create confusion and uncertainty particularly amongst smaller issuers – has been the subject of criticism for some time. In 2019, Commissioner Peirce remarked that “the process of determining whether a company is an SRC and a non-accelerated filer, or an SRC and an accelerated filer, or outside of both categories is so complicated that even we at the SEC need diagrams to figure it out.”[2] Commissioner Uyeda has similarly remarked that the SEC needs to “re-align” filer status categories to better reflect public markets today.[3]
The Proposal would effectively consolidate the current filer status system down to two categories: Large accelerated filers and non-accelerated filers. The accelerated filer and smaller reporting company status would be eliminated. Emerging growth company status would still remain, however most regulatory accommodations currently available to EGCs would become available to NAFs under the Proposal.
Large accelerated filers / non-accelerated filers
The Proposal seeks to raise the public float threshold that triggers LAF status from the current $700 million to $2 billion. Additionally, the “seasoning” period that determines when an issuer becomes a large accelerated filer would be extended from 12 months to 60 months after the date on which the issuer becomes subject to Exchange Act reporting requirements. In other words, a company that has recently completed an initial public offering would not become a large accelerated filer until a minimum of five years after they have gone public. Any issuer that does not qualify as a large accelerated filer under the Proposal would be treated as a non-accelerated filer.
Of particular interest to the CHRO Association are the scaled reporting requirements (including those currently applicable to EGCs and SRCs) that would be extended to all non-accelerated filers under the Proposal. These include:
The Proposal would substantially expand the number of companies that qualify as NAFs. The SEC estimates that over 1,700 companies would be newly eligible NAFs under the Proposal, the vast majority of which currently file as large accelerated filers or accelerated filers.[4]
The SEC is right to re-examine the lines of demarcation in its rules that determine whether issuers should be eligible for tailored rules based upon their size relative to the rest of the public markets.
The current threshold that determines non-accelerated filer status (<$75 million in public float) was first established in 2005.[5] SRC criteria were only recently updated in 2018 to include companies with a public float less than $250 million or annual revenue less than $100 million, subject to certain limitations.[6] When Congress adopted the JOBS Act in 2012, it determined that a company could file as an EGC if it had annual revenue under $1 billion (adjusted for inflation over time).
To put this into perspective, in 2005 when the non-accelerated filer definition was created, the total market capitalization of the U.S. stock market was roughly $17 trillion, compared to over $75 trillion today. The equity markets have similarly had a roughly 4x increase since the JOBS Act was passed 14 years ago.
Markets have evolved the concept of what constitutes a “small” issuer over time, but regulation has not kept up. In fact, over the last twenty years, corporate disclosure – specifically executive compensation disclosure – has only grown in terms of cost and complexity. If adopted, the Proposal will help many smaller or newly public companies dedicate more resources to growth rather than burdensome reporting mandates that provide investors with little information of use.
The CHRO Association filed comments in response to the SEC’s roundtable on executive compensation disclosure in 2025, and we are pleased that a broader reform proposal to these requirements is on the SEC’s current regulatory agenda.[7] As we wrote at the time, “executive compensation disclosure has become complex, repetitive, and difficult for investors to understand, thereby negating in large part the purpose of the disclosure.”[8]
To be clear, we continue to strongly support the recommendations contained in our 2025 comments and changes to executive compensation and other reporting rules for all issuers. We look forward to continuing our work with the SEC as initiatives related executive compensation and Reg S-K reform move forward.
Any exemptions or tailoring of disclosure ultimately adopted would be based upon the reasoned judgment of the SEC – reached through the notice-and-comment rulemaking process – that the disclosure is not necessary for investors to make informed decisions. Companies that avail themselves of the new exemptions may receive pressure from proxy advisory firms, third-party activists, or outside consultants to continue providing disclosure that the SEC has determined is not useful for investors. However, companies should question whether such calls are based upon potential conflicts of interest or other factors rather than the actual needs of their shareholders.
The Need for Principles-Based Executive Compensation Disclosure
Several aspects of the Proposal build upon key takeaways from the SEC’s 2025 executive compensation disclosure roundtable.[9] Chairman Atkins described the current state of disclosure as a “Frankenstein patchwork,” while Commissioner Uyeda pointed out that the purpose of executive compensation disclosure is to illuminate executive pay levels for investors – not to influence how companies determine those levels.
One analysis found that the average CD&A has grown to 10,000 words,10 while a roundtable panelist noted their CD&A has grown dramatically since 2000, from an average of five pages to over 35 pages today. Additionally, the increasing number of mandated tables and rigid definitions (such as “compensation actually paid”) has forced companies to provide supplementary explanations, exacerbating complexity rather than enhancing transparency.
Mandated tables and overly prescriptive disclosure rules constrain the ability of the company to clearly tell its pay for performance story. Force-fitting the details of compensation into a one size-fits-all series of mandated tables and narratives limits the ability of the company to convey the criteria used to assess the effectiveness of the compensation arrangements the compensation committee has adopted.
The extent to which the prescribed tables and disclosure requirements signal to investors that the standardized information reflects the deliberations and decisions of the compensation committee encourages a superficial understanding of the “what, why and how” of a company’s approach to linking executive pay to performance.
Key Provisions of the Proposal
Under the Proposal, the following scaled requirements would be made available to all NAFs:
This is not an exhaustive list of changes that would be made for NAF reporting, however we wish to provide our views below regarding some of these topics.
Pay Ratio Disclosure
We support an exemption for NAFs to report pay ratio information under Section 953(b) of the Dodd-Frank Act, similar to the exemption that currently exists for EGCs and SRCs. No legitimate purpose exists for the collection of the data required to calculate the pay ratio disclosure rule and median employee compensation as required by the rule. The SEC’s own estimates when it adopted the final pay ratio rule in 2015 found that annual compliance costs would approach $370 million.
For all issuers, the CHRO Association continues to call for the following changes to the pay ratio rule:
Pay Versus Performance
Section 953(a) of the Dodd-Frank Act stipulates that the “pay versus performance” disclosure required of issuers:
“shows the relationship between compensation actually paid [to NEOs] and the financial performance of the issuer, taking into account any change in the value of the shares of stock and dividends of the issuer and any distributions.”
Unfortunately, when the SEC adopted the final pay versus performance rule in 2022, it elected to implement a highly prescriptive mandate that does little to help investors understand how issuers actually align executive pay with corporate performance. The statutory text of Section 953(a) does not explicitly require the types of prescriptive tabular disclosure, performance measures, or the regulatory definition of “compensation actually paid” which are all included in the 2022 rule.
A survey conducted by the CHRO Association and Society for Corporate Governance found that a majority of public companies have never been asked about the pay versus performance disclosure. Still, costs of compliance remain high – a majority of companies reported spending 20+ hours on compliance (some as high as 60+ hours) and some reported spending as much as $75,000 on outside advisors.
Accordingly, we support an exemption from this mandate for NAFs under the Proposal. For all other issuers, we continue to support alignment with the intent of Section 953(a) and a more principles-based approach by the SEC to pay versus performance.
CD&A
A survey conducted by Stanford University’s Rock Center for Corporate Governance in 2015 found that only 38% of institutional investors actually read the CD&A section of company proxies. Respondents also generally found that CD&A disclosure tends to be “overly boilerplate” and “not decision-useful.”[11]
Since that survey was conducted, CD&A narratives have tended to only grow in size and complexity, while mandates such as pay ratio and pay versus performance have also been implemented, further muddying the executive compensation picture of companies for investors.
We support giving companies the flexibility to craft their own narrative disclosure regarding executive compensation. Accordingly, we support providing an exemption for NAFs from the current CD&A requirements in order to provide these companies with such flexibility.
Recommended Changes to NEO and Tabular Disclosure Provisions of Proposal
The current proposal would extend to NAFs the ability to disclose compensation for three NEOs (as opposed to five) and also an exemption from certain tabular disclosure requirements, listed above. However, the SEC solicits comment in the proposal as to whether additional or different regulatory accommodations should be made available to NAFs.[12]
In light of this, the CHRO Association wishes to reiterate our recommendations made in 2025 with respect to tabular disclosure in the proxy as well as the consolidation of NEO disclosure. While the Proposal includes positive changes to current disclosure, we believe it could be improved upon in these two areas.
With respect to compensation tables, we support the consolidation of all current pay tables into two simplified tables:
Summary Compensation Table – Total Direct Compensation (Target). This table would disclose the annually awarded target compensation opportunities approved by the board for the CEO and CFO. It would include annual base salary, annual and long-term cash incentive opportunity at target, and the aggregate grant-date value of equity awards. This table would allow investors to see the total intended value of the annual compensation package for each executive as determined by the board (to provide a competitive level of pay if the targeted performance objectives are achieved).
Summary Compensation Table – Total Direct Compensation (Earned). This table would disclose the compensation actually earned or realized during the year, including annual base salary, annual and long-term cash incentives and bonuses actually earned, and the value of equity awards on the date such awards vest. It would exclude pension accruals and similar non-discretionary benefit changes unrelated to the board’s annual pay decisions.
Additionally, with regard to NEO disclosure, we support requiring disclosure only of the chief executive officer (CEO) and chief financial officer (CFO). Issuers that are currently required to disclose CEO, CFO, and top 3 NEO executive compensation find themselves in a difficult situation. “Top three” NEO compensation can vary greatly year to year and from company to company, depending upon one-time awards or organizational changes. In some years, the head of a business unit may be in the “top 3” while in other years a general counsel or chief operating officer may be in the group, making it difficult to compare compensation across companies or even within the same company.
Additionally, investors and proxy advisory firms tend to primarily focus on CEO pay when evaluating say on pay proposals or pay versus performance alignment. Disclosing compensation for executives beyond the CEO and CFO therefore does little to advance investor understanding of a company’s pay practices and can add complexity to proxy disclosures.
Smaller public issuers including SRCs have already been required for some time to only provide compensation disclosure for three executives – the CEO and the next two most highly compensated executives. We believe that a clear requirement across all issuers to simply provide CEO and CFO compensation would meet investor demand and help provide a clear picture of compensation for the top executives within a company.
Conclusion
We appreciate the opportunity to provide our views on these important topics and look forward to continuing to work with the SEC as its disclosure reform efforts move forward.
1 Proposal at 35(go back)
2 Statement at Open Meeting on Proposed Amendments to Sarbanes Oxley 404(b) Accelerated Filer Definition. Commissioner Hester Peirce (May 9, 2019) https://www.sec.gov/newsroom/speeches-statements/peirce-proposed-amendments-sox-404b-accelerated-filer-definition (go back)
3 Remarks at the Florida Bar’s 41st Annual Federal Securities Institute and M&A Conference. Commissioner Mark Uyeda (Feb. 24, 2025) https://www.sec.gov/newsroom/speeches-statements/uyeda-remarks-florida-bar-022425 (go back)
4 Proposal at 149(go back)
5 Revisions to Accelerated Filer Definition and Accelerated Deadlines for Filing Periodic Reports. Final Rule (December 21, 2005) https://www.sec.gov/files/rules/final/33-8644.pdf (go back)
6 Amendments to the Smaller Reporting Company Definition. Final Rule (June 28, 2018) https://www.sec.gov/files/rules/final/2018/33-10513.pdf (go back)
7 Proposal at 149(go back)
8 Revisions to Accelerated Filer Definition and Accelerated Deadlines for Filing Periodic Reports. Final Rule (December 21, 2005) https://www.sec.gov/files/rules/final/33-8644.pdf (go back)
9 Amendments to the Smaller Reporting Company Definition. Final Rule (June 28, 2018) https://www.sec.gov/files/rules/final/2018/33-10513.pdf (go back)
10 Preparing for Proxy Season 2022. Equilar / Donnelly Financial Solutions (November 2021) https://www.dfinsolutions.com/sites/default/files/documents/2021-11/equilar-preparing-for-proxy-season-2022-nov2021.pdf(go back)
11 2015 Investor Survey: Deconstructing Proxy Statements – What Matters to Investors. Stanford Rock Center for Corporate Governance / RR Donnelly / Equilar
https://www.gsb.stanford.edu/faculty-research/publications/2015-investor-survey-deconstructing-proxy-statements-what-matters(go back)
12 Question 13 of proposing release (Page 96) “Alternatively, are there other or new disclosure scaling or other regulatory accommodations that should be made available to NAFs?”(go back)