Center Files Comments With SEC Pushing Back Against AFL-CIO, Urging Use of Realized, Realizable Comp in Pay Disclosures

October 31, 2014

HR Policy's Center On Executive Compensation recently filed comments with the U.S. Securities and Exchange Commission reiterating its views on the forthcoming implementation of the Dodd-Frank pay for performance disclosure and responding to recent comments by the Council of Institutional Investors (CII) and the AFL-CIO.  The Center's comments make the following points:

  • Reiterate its position that the pay for performance disclosure should be a supplement to the Summary Compensation Table rather than a replacement, in agreement with CII and the AFL-CIO.

  • Argue that contrary to the AFL-CIO's comments, the disclosure should permit the use of realized and realizable pay as supplemental disclosures rather than using the Summary Compensation Table, which provides a view of the accounting expense of compensation granted, but is ill-suited to pay for performance disclosure.

  • Refute the AFL-CIO's argument that realized pay understates compensation, noting that having this supplemental form of compensation would have provided more transparency to disclosures such as Facebook's Mark Zuckerberg, whose total Summary Compensation Table pay was merely $700,000, even though he realized over $3 billion in compensation through stock option exercises.

  • Urge that the pay for performance disclosure generally be made over a longer time horizon, and that the Commission "provide for flexibility to allow companies to craft a disclosure consistent with the company's investment and business cycles."

  • Advocate that the pay for performance comparison be made to total shareholder return and "other metrics which demonstrate their incentive plans are consistent with long-term increases in shareholder value and with the company’s business strategy."
The SEC is expected to publish proposed rules implementing the pay for performance disclosure this fall or early next spring.