Proxy Statement Disclosure Rules for Executive Compensation (U.S.)

     >>> for 8-K disclosure issues re executive compensation, see securities / links.

CD&A -- Compensation Discussion and Analysis -- and Summary Comp. Tables

SEC Rules and Interpretations
Item 402 of Reg. S-K

  • Release 33-8732 (adopting Item 402 Overhaul in 2006).
  • Release 33-9089 (amending Item 402 Rules in 2008, e.g. grant date FMV of options).
  • SEC Compliance & Disclosure Interpretations, aka CD&Is.
  • 2019.02.06  Say on Pay Reminder: Excise the Irritants.  There is a subtlety within a recent empirical study about how companies react to negative say on pay. While the problem comes from pay-for-performance (P4P) disconnects, the solution does not seem to involve reducing the compensation, but instead . . .   continued at  Say on Pay.

Specific Disclosures

SEC CD&Is (Interpretations).

  • Retention Bonus (disclosed in main year not when paid) and Performance Awards (negative discretion exercised within year of grant results in disclosure based on discretion) - SEC Q&A 2013 May.  
  • Post Year-end Decisions -- see Question 118.07 (added 2011.Mar.04):
    • Question: In Compensation Discussion and Analysis (CD&A), is a company required to discuss executive compensation, including performance target levels, to be paid in the current year or in future years? ​
    • Answer: No. The CD&A covers only compensation "awarded to, earned by, or paid to the named executive officers." Although Instruction 2 to Item 402(b) provides that the CD&A should also cover actions regarding executive compensation that were taken after the registrant's last fiscal year's end, such disclosure requirement is limited to those actions or steps that could "affect a fair understanding of the named executive officer's compensation for the last fiscal year."


  • From SEC CD&Is: 246.12 A remuneration plan applicable to 300 key executives in a company with 18,000 employees would not be considered a plan available to employees generally. Therefore, it would not fall within the exemption provided by Item 601(b)(10)(iii)(C)(4) and would have to be filed as an exhibit. In this regard, if a compensatory plan, contract or arrangement is available generally to all officers and directors but is not available to all employees of the company, the plan, contract or arrangement does not fall within this exemption. [July 3, 2008] 

​​Severance of NEO

  • From SEC CD&Is: 226.02 Following the end of the last completed fiscal year (2006), but before the proxy statement is filed, a named executive officer leaves the company (in early 2007). A Form 8-K disclosing this termination is filed, as required by Item 5.02(b) of Form 8-K. This named executive officer is not the principal executive officer or the principal financial officer and will not be a named executive officer for the current fiscal year (2007) based on Item 402(a)(3)(iv). The severance package that applied to the named executive officer's termination is not newly negotiated but instead has the same terms that otherwise would apply. In these limited circumstances, it is permissible to provide Item 402(j) disclosure for the named executive officer only for the triggering event that actually occurred (even though beyond the scope of Instruction 4 to Item 402(j) because it took place after the end of the last completed fiscal year), rather than providing the disclosure for several additional scenarios that no longer can occur. [Aug. 8, 2007] 

Violations (relating to Disclosure or Reporting of Executive Compensation)

  • ​See Shareholder Derivative Litigation
  • 2019.01.28  Unfortunate yet Timely Reminder: "All Means All" for Executive Pay Disclosures.  In the wake of reports that its CEO underreported over $79 million of compensation, Law360 not surprisingly reports that "Nissan Faces SEC Inquiry." From the company perspective, Nissan's Dec. 10th press release gives a sense of the risk, in that Nissan acknowledges that "Making false disclosures in annual securities reports greatly harms the integrity of Nissan’s public disclosures in the securities markets." The reputational, shareholder, and governmental enforcement risks are indeed great. That brings to mind the following thoughts for public companies that are preparing their 2019 proxy statements: (1) it has been more than 15 years since the SEC overhauled its executive compensation disclosure rules, (2) those rules take a principles-based approach rather than a prescriptive approach, meaning that public companies are expected to honor the spirit of the SEC's disclosure rules, and (3) the SEC has repeatedly held to the principle that "all means all" when disclosing executive compensation. Overall, employers need to remain vigilant to make full disclosures of executive compensation, and to exercise proper controls, in order to stay on the straight path with the SEC, shareholders, and the public markets.