Insights from the SEC Roundtable on Executive Compensation Disclosure Requirements

A few key themes emerged during the roundtable:

• Overcomplexity: SEC Chairman Paul Atkins described the current executive compensation disclosure rules as a “Frankenstein patchwork,” and suggested that the rules have become too complex to understand, while leaving investors without a clear picture of a company’s executive compensation programs.
• Tension: Some issuers and advisors argued that current executive compensation disclosures are overly burdensome and costly, while some investors advocated for more transparency, especially in areas like the life cycle of equity awards, pay-versus-performance, and perquisites.
• Dodd-Frank Criticism: Certain rules initially prescribed by the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010, such as CEO pay ratio, pay-versus-performance, and clawbacks, were criticized for requiring significant resources to achieve compliance, especially for smaller issuers, without necessarily providing investors with useful information.

Statements from Chairman Atkins and other SEC Commissioners at the roundtable reinforced the notion that the SEC will be revisiting the executive compensation disclosure requirements, which may result in revisions to Item 402 of Regulation S-K. Chairman Atkins noted that the SEC would still be soliciting public comments in the weeks following the roundtable as part of the agency’s review in connection with any potential rulemaking proposals. Given that the current executive compensation disclosure requirements were originally enacted in 2006, the ability to submit comments to the SEC on this topic provides a rare opportunity to provide input on future rulemaking.

Detailed Summary

The following is a summary of the introductory remarks from Chairman Atkins and other SEC Commissioners, as well as the three panels at the roundtable. A recording of the roundtable is available at this link on the sec.gov website.

Introductory Remarks: A Commission Committed to Clarity

The SEC’s roundtable opened with a shared recognition among Commissioners Atkins, Hester Peirce and Mark Uyeda that executive compensation disclosure, as it currently stands, is ripe for reevaluation. What began as a foundational component of investor protection under the federal securities laws has, over time, evolved into something far more complex—and perhaps far less useful.

Chairman Atkins set the tone by tracing the historical layering of rules that now govern executive compensation disclosure, from the introduction of the Summary Compensation Table in 1992 to the Compensation Discussion & Analysis (“CD&A”) requirements added in 2006. He described today’s regime as a “Frankenstein patchwork of rules” — a tangled web of overlapping requirements so voluminous and complex that they may be more daunting to navigate than the monster was to Dr. Frankenstein himself, all while leaving investors without a clear picture of a company’s executive compensation programs.

All three participating Commissioners expressed concern that disclosures meant to inform investors have instead become overly technical, excessively long, and in some cases, divorced from materiality. Rather than serving the reasonable investor, the Commissioners argued that the current landscape of today’s disclosure environment is long, complex, and laden with charts that obscure rather than illuminate compensation decisions. This complexity not only increases compliance costs but may also distort corporate behavior, a result the Commissioners echoed was never intended by the rules, for example, by deterring companies from offering legitimate personal security benefits to executives simply because such measures would need to be disclosed as “perks.”

Commissioner Peirce offered a particularly candid rebuke in her critique of “the ugly reality” of executive compensation disclosures, labeling the current approach “increasingly unwieldy and expensive and decreasingly useful.” She questioned whether the disclosures required under Item 402 genuinely help investors make informed decisions, or whether they simply satisfy public curiosity, repackage already-available data, and fuel a “more is better” mindset driving up compliance costs without corresponding benefits. Commissioner Peirce cited recent rules, such as the pay-versus-performance disclosures mandated under Dodd-Frank, as an example where implementation has felt more like a “regulatory tax” than a value-add for investors. Her bottom line: executive compensation disclosure should “reflect rather than direct corporate actions.” If the mandated disclosures do not help investors in evaluating the securities price of a company, Commissioner Peirce argued, then why mandate them at all?

Commissioner Uyeda echoed this sentiment and focused his remarks on the appropriate boundaries of the Commission’s authority and purpose, detailing that executive compensation disclosures are not vehicles for the SEC to promote broader social or political goals. He reminded participants that the Commission has no authority to set or limit executive pay, and that its role should be confined to ensuring the disclosure of material information that supports informed investment and voting decisions. He specifically raised critiques from several of the submitted comment letters that were skeptical of the CEO pay ratio rule, which one commenter suggested offers little meaningful insight given the diversity of workforce and compensation structures across varying industries. Commissioner Uyeda also voiced concerns about the recent clawback rules, questioning their clarity and utility, and suggesting that more careful stakeholder engagement and a less rushed drafting process might have produced a more effective result.

Collectively, the Commissioners agreed that the time is ripe for a holistic reassessment of whether the current executive compensation disclosure rules are achieving their intended goals. Are they helping investors? Are they cost-effective? Are they materially relevant? The roundtable marked the start of that conversation — and signaled that the SEC is open to reform. Importantly, Chairman Atkins suggested that rulemaking proposals based on the input from the roundtable may be forthcoming and invited continued public comment as the Commission evaluates next steps.

Panel 1: Executive Compensation Decisions: Setting Compensation and Informing Investment and Voting Decisions

Key Takeaways from Panel 1 of the SEC’s Executive Compensation Roundtable

The first panel of the roundtable brought together a multifaceted group of corporate leaders, investors, and compensation advisors to explore the evolving landscape of executive compensation. The discussion reviewed the practical process for how a company sets its executive compensation and then proceeded to cover the interplay between compensation composition, corporate culture, investor expectations, and regulatory disclosure.

Below are the key takeaways from the Panel 1 discussion:

• Executive pay is a collaborative, year-round process. Compensation committees — composed of independent directors — lead the process, supported by HR teams, outside consultants, management, and investor feedback.
• Regulatory disclosures and proxy advisor preferences are major design drivers. Pay design is often shaped more by what needs to be disclosed or will avoid negative proxy advisor recommendations than by what best serves company strategy.
• Say-on-pay votes significantly impact compensation decisions. A negative recommendation from proxy advisors can swing 25–30% of the vote, leading companies to avoid “red flag” practices even when they may be appropriate for the business.
• Investor engagement is a continuous process, not limited to proxy season. Off-cycle engagement allows companies to explain their pay philosophy, align on long-term value creation, and shape future disclosures.
• Compensation structure should reflect company strategy and culture. The right mix of cash, equity, and performance metrics varies based on company maturity, growth phase, and business model.
• Disclosure requirements can distort compensation decisions. Companies may make pay decisions based on how they’ll appear in the proxy, particularly in the Summary Compensation Table, rather than what aligns best with the company’s goals.
• Simpler, more transparent equity compensation is often preferred by investors. Despite pressure to use complex performance awards, some investors favor straightforward equity grants that clearly align executives’ interests with shareholders.
• Panelists urged a more flexible and meaningful disclosure framework. Recommendations included reducing unnecessary tables, enhancing transparency of the equity award life cycle, disclosing settlement methods (cash vs. stock), and refocusing on disclosures that provide truly material information.

Panel 2: Executive Compensation Disclosure: How We Got Here and Where We Should Go

Key Takeaways from Panel 2 of the SEC’s Executive Compensation Roundtable

The second panel reviewed the evolution of the executive compensation disclosure rules and then moved into the current challenges facing issuers and investors, the disclosure of perks, and the rules governing named executive officers. Below are the key takeaways from the Panel 2 discussion:

• Dodd-Frank Act. Say-on-pay has been a catalyst for greater shareholder engagement and improved disclosure quality. Other rules — particularly pay-versus-performance and CEO pay ratio — are highly criticized for their complexity and limited utility.
• Most investors prefer a shorter, simpler CD&A. Investors emphasized the need for quality over quantity, calling for disclosures that are navigable, comparable, and written in plain English.
• Investors are pushing for machine-readable disclosures. Investors are pushing for a mandate that companies disclose information on a uniform basis in a machine-readable format.
• Two central challenges for investors: navigability and comparability. Investors want to be able to find relevant information, use it, and consistently apply their analysis.
• Disclosure requirements are increasingly boilerplate. Much of the added detail to the disclosure is boilerplate, driven by compliance rather than substantive changes in compensation philosophy or practice.
• Investors are not as concerned with perk disclosure, unless such disclosures are a red flag. For many investors, perks are not a significant driver of the say-on-pay voting or analysis, unless the perks are excessive, unaligned, or disproportionate relative to performance or peer group activity.
• Potential for expansion of the named executive officer disclosure rules. Some investors favor scaling the number of named executive officers included in the disclosure to more than five and including others that have a significant influence in the operation of the company.

Panel 3: Reflections on the Day’s Earlier Panels: Framing the Conversation

Key Takeaways from Panel 3 of the SEC’s Executive Compensation Roundtable

The focus of the third panel of the SEC’s executive compensation roundtable was structured around three main objectives: (1) reflecting on and analyzing key themes that had emerged from the earlier panels, (2) assessing the utility and limitations of the Summary Compensation Table and other Item 402 tables and disclosures, and (3) exploring the execution and consequences of Dodd-Frank rulemakings.

• Say-on-pay Some panelists argued that say-on-pay, though meant to improve shareholder engagement, has unintentionally made executive compensation overly complex and costly — driven by imported reforms, layers of advisors, and excessive disclosures that detract from broader governance issues.
• Engagement in practice vs. principle. Panelists emphasized that although say-on-pay has elevated compensation as a key topic in investor engagement, current disclosures fall short by failing to answer foundational questions about pay structure, embedded risk, and long-term effectiveness, leaving investors with scattered details rather than a holistic view.
• Complexity breeds confusion Some panelists criticized the excessive granularity and legalese in compensation reporting while urging a shift toward clearer, principles-based guidance on perks and CD&A content, and underscoring that for long-term investors like CalPERS, executive pay disclosures remain vital for stewardship despite not impacting daily trades.
• Regulatory overlap and governance realities. Members of the panel emphasized that existing governance structures with strong board oversight shape executive pay decisions, and would benefit from improved alignment among investor expectations, board duties, and the internal capacity needed to support those processes effectively.
• Reframing pay-versus performance. Some panelists defended the core idea behind the SEC’s pay-versus-performance rules — anchored in audited financials and realizable pay at vesting — while acknowledging the limited practical value of such rules; panelists broadly agreed that the overall disclosure framework is overly complex, redundant, and in need of clearer, more decision-useful reform.
• Rethinking the Summary Compensation Table. Panelists broadly agreed that the current Summary Compensation Table confuses more than it clarifies — blending inconsistent data points, timelines, and methodologies in ways that mislead investors and obscure true compensation outcomes; they called for a fundamental overhaul, including simplified, lifecycle-based disclosures aligned with how boards actually evaluate and communicate executive pay.

• Beyond the Summary Compensation Table: Rethinking Item 402. Panelists broadly agreed that many supplemental compensation tables under Item 402 are redundant, inconsistent, and burdensome, in turn prompting calls for simplification and clearer alignment with actual decision-useful data, while cautioning that any reforms must preserve accountability and insights critical to investor understanding, particularly during times of corporate stress.

• Dodd-Frank compensation rules: Statutory intent vs. practical impact. Panelists criticized the SEC’s discretionary implementation of Dodd-Frank compensation rules, such as CEO pay ratio, pay-versus-performance, and clawbacks, as well-intended but often overly complex, inconsistently aligned with board practices, and prone to unintended consequences, prompting calls for simplification, better comparability, and more decision-useful disclosures.

The SEC will continue to solicit public comments in the weeks following the roundtable. If your company is considering submitting a comment, Vinson & Elkins would be happy to assist.

We will continue to monitor developments regarding the SEC’s review and consideration of modifications to executive compensation disclosures. Please reach out to your Vinson & Elkins team to discuss these matters in more detail.