The U.S. Securities and Exchange Commission (“SEC”) recently issued a press release announcing that it will host a public roundtable on June 26, 2025, to discuss executive compensation disclosure requirements. The event will be held at the SEC’s headquarters in Washington, D.C., and will also be streamed live on SEC.gov (with a recording to be posted at a later date).
In a statement accompanying the announcement, SEC Chairman Paul S. Atkins noted that while executive compensation disclosure requirements, and the resulting disclosure, have become “increasingly complex and lengthy,” it is unclear whether the added complexity and length has provided investors with additional information that materially informs their investment and voting decisions. The roundtable is intended to be part of the SEC’s review of its executive compensation disclosure requirements as it determines whether such requirements remain cost-effective and lead to the disclosure of material information without excessive immaterial information.
The roundtable will include representatives from public companies and investors as well as other experts. While the SEC will provide additional details about the roundtable’s agenda at a later date, Chairman Atkins outlined a series of key questions (copied below) that will be considered by the SEC in forming the agenda for the roundtable. These questions are designed to elicit feedback on how the executive compensation disclosure requirements might be streamlined to ensure that investors receive clear, decision-useful information, without creating an undue burden on registrants.
The questions focus on the scope, clarity, and effectiveness of existing disclosure requirements under Item 402 of Regulation S-K, as well as how evolving market practices – such as those related to executive compensation decision-making, perquisite determinations, clawback policies, and pay-versus-performance alignment – should be reflected in future rulemaking.
Chairman Atkins has asked members of the public to provide input on the questions both before and after the roundtable. Public companies should thoughtfully consider the questions and whether to take advantage of the opportunity to submit comments, particularly if they have insights that may help inform the SEC’s evaluation of the current executive compensation disclosure framework. All comments will become part of the public record, and parties are reminded to omit personally identifiable information they do not wish to be disclosed.
If your company is considering submitting a comment in connection with the upcoming roundtable, Vinson & Elkins would be happy to assist. Vinson & Elkins has significant experience assisting companies in developing and submitting commentary in similar contexts.
We will continue to monitor developments regarding the roundtable and will also provide timely updates on any regulatory changes that may result from the roundtable. Please reach out to your Vinson & Elkins team to discuss these matters in more detail.
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Key Questions from Chairman Atkins’s Statement
Executive compensation decisions: setting compensation and making investment and voting decisions
- What is the process by which companies develop their executive compensation packages? What drives the development and decisions of compensation packages? What roles do the company’s management, the company’s compensation committee (or board of directors), and external advisors play in this development?
- Current disclosure requirements seek to unpack these processes for investors. How can our rules be revised to better inform investors about the material aspects of how executive compensation decisions are made?
- What level of detail regarding executive compensation information is material to investors in making their investment and voting decisions? Is there any information currently required to be disclosed in response to Item 402 of Regulation S-K that is not material to investors or that could be streamlined to improve the disclosure for investors? How do companies’ engagement with investors drive compensation decisions and compensation disclosure?
Executive compensation disclosure: past, present, and future
- The Commission substantially revised its executive compensation disclosure requirements in 2006 with requirements to provide, among other things, enhanced tabular disclosure of compensation amounts and a compensation discussion and analysis of the company’s compensation practices. The rules were intended to provide investors with a clearer and more complete picture of the compensation earned by a company’s executive officers. Have these disclosure requirements met these objectives? Do the required disclosures help investors to make informed investment and voting decisions? Given the complexity and length of these disclosures, are investors able to easily parse through the disclosure to identify the material information they need? In what ways could disclosure rules be revised to return to a simpler presentation and focus?
- The Dodd-Frank Act added several executive compensation-related requirements to the securities laws, including shareholder advisory voting on various aspects of executive compensation. What types of disclosure do investors find material in making these voting decisions? Are companies able to provide such disclosure in a cost-effective manner? Do the current rules strike the right balance between eliciting material information and the costs to provide such information?
- With the experience of almost 20 years of implementing the 2006 rule amendments, how can the Commission address challenges that either companies or investors have encountered with executive compensation rules and the resulting disclosures in a cost-effective and efficient manner while continuing to provide material compensation information for investors? For example, are there requirements that are difficult or costly to comply with and that do not elicit material information for investors? Are there ways that we can reduce the cost or otherwise streamline the compensation information required by the rules?
Executive compensation hot topics: exploring the challenging issues
- The Commission recently adopted rules implementing the requirements of Dodd Frank related to pay-versus-performance and clawbacks. Now that companies have implemented the new rules, are there any lessons we can learn from their implementation? Can these rules be improved? If so, how? For example, which requirements of these rules are the most difficult to comply with and how could we reduce those burdens while continuing to provide investors with material information and satisfy these statutory mandates?
- Since adoption of the pay-versus performance rules, I have continued to hear concerns regarding the rule’s definition of “compensation actually paid” (CAP). What has been companies’ experience in calculating CAP and what has been investors’ experience in using the information to make investment and voting decisions?
- What has been companies’ experience in applying the two-part analysis articulated by the Commission in 2006 with respect to evaluating whether perquisites for executive officers must be disclosed? How do disclosure requirements resulting from the test, and whether a cost constitutes a perquisite, affect companies’ decisions on whether or not to provide a perquisite? For example, how has the application of the analysis affected evaluations relating to the costs of security for executive officers? Are there types of perquisites that have been particularly difficult to analyze? How do investors use information regarding perquisites in making investment and voting decisions?
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This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.
