SEC Set to Propose Dodd-Frank Pay for Performance Rules

Executive Pay Legislation and Regulation

This week, the SEC announced that it will vote next week on proposed rules implementing the Dodd-Frank pay for performance disclosure requirement.  The pay for performance requirement mandates the Commission to implement rules requiring companies to disclose the relationship between executive compensation "actually paid" and financial performance, taking into account total shareholder return (TSR).  Last fall, the Association's Center On Executive Compensation submitted comments to the Commission urging it to take a broad principles-based approach, allowing companies to use realized or realizable pay in meeting the statutory requirements.  In doing so, the Center urged the Commission to define those terms consistent with the conceptual framework the Center created in conjunction with The Conference Board and the Society of Corporate Secretaries and Governance Professionals.  It is not clear at this point whether movement on the proposed pay for performance rules is an indication that final pay ratio rules are likely sooner rather than later, but last week the SEC's Director of the Division of Corporation Finance indicated in a speech that the staff was still in the process of drafting pay ratio rules.