Equilar’s New PvP Tracker Gives Glimpse into Early Proxy Filings

As the early proxy season begins, Equilar’s new free SEC PvP tracker will monitor and summarize SEC Pay Versus Performance disclosures. The tracker will be updated regularly with the 50 most recent disclosures in proxy filings. It includes a pie graph to depict the most commonly used company performance measure and shows an alignment “score” between 0.0 and 1.0 (perfectly related) that reflects the correlation between the CEO’s compensation actually paid and TSR.

While only a handful of proxies have been filed so far, we note that companies have commonly created a new section in the proxy following Pay Ratio and continue to point to the CD&A for additional context. Most are making it abundantly clear in the footnotes that “compensation actually paid” does not, in fact, reflect the actual amounts of compensation paid to the CEO and NEOs.

The equity valuation methodology was expected to create havoc for employers with significant fluctuations in stock price, and initial filings indicate it is in fact resulting in some surprising information, such as negative “compensation actually paid” (CAP) values for some executives.  Companies vary in the degree to which stock price implications are explained.

• Magellan Midstream Partners disclosed negative CAP for their former CEO in 2020 and was silent on the matter. Overall, alignment according to the Equilar tracker was 0.31.
  
  
• Equitrans Midstream disclosed negative CAP for their CEO in 2022 and made a footnote reference about the SEC’s valuation methodology. Their Equilar alignment rating was much higher at 0.77.
  
  
• Significant changes in grant value and current fair value have resulted in IQVIA Holdings including a big and bolded disclaimer in their preliminary filing noting:

“Given a significant amount of the values in the columns for Compensation Actually Paid to our PEO and the Other NEOs are based on our stock price as of a particular date in time, and specifically under the SEC rules, required to be the last day of the listed fiscal year, it is important to note that the values could have been dramatically different if other dates were chosen…[values] could have been significantly less if other dates were chosen or if our stock price happened to be lower on the last day of the listed fiscal year.”

As companies continue to refine how to portray relationships, they can refer to the tracker to identify filings available on EDGAR. A few preliminary proxies are worth taking a look:

• Park National used a combination of narrative and graphs to show the relationships discussing how pay is “generally aligned” or “not necessarily” aligned. They included four additional graphs with explanations for each additional performance measure actually used within the incentive plan.
  
  
• Trustmark Corporation relies more on narrative emphasizing key factors which drove the compensation actually paid. A graph is used to compare TSR performance against the peer group.

The tracker is provided by Equilar for free, in addition to the PVP profile launched in December that includes a variety of analytics.