Changes to Pay Versus Performance Rules for 2023 Proxy Season
The 2023 proxy season is anticipated to bring several changes to how public companies will report pay versus performance. This article will discuss the new regulations to be aware of as companies prepare to disclose their executive compensation packages.
Company Disclosures
Companies will need to thoroughly discuss how their executive compensation is linked to their performance. This should include:
- Performance Targets: Companies should clearly explain the targets they have set for executive performance and explain how they are tied to the success of the organization.
- Payouts: Companies should disclose the amount of compensation they plan to pay out, as well as any metrics they used to determine the payout.
- Compensation Policies: Companies should review their executive compensation policies and explain which policies have been established to align the company’s interests with shareholder interests.
Use of Non-GAAP Measures
The Securities and Exchange Commission (SEC) has recently issued regulations limiting the use of non-GAAP measures. Companies should familiarize themselves with these regulations to ensure that their disclosures do not violate any rules.
Transparency
The goal of the new rules is to ensure that executive compensation packages are disclosed in a transparent and accurate manner. Companies should ensure that their disclosures are clear and consider how their performance-based compensation packages could be viewed by shareholders.
In conclusion, companies should prepare to comply with the regulations for the 2023 proxy season by familiarizing themselves with the new pay versus performance rules. Doing so will help ensure accurate disclosures of executive compensation and positive engagement with shareholders.