On June 26, 2025, the U.S. Securities and Exchange Commission (SEC) hosted a roundtable on executive compensation disclosure requirements with representatives from public companies, their advisors, and investors.
The program began with remarks from Chairman Atkins and Commissioners Peirce and Uyeda, each of whom indicated their support for reexamining the rules. Chairman Atkins, calling the current executive compensation disclosure framework a “Frankenstein patchwork of rules,” stressed the need to consider whether the rules are cost-effective for companies to comply with, and that the information required by the rules is material to the company and understandable to investors. Similarly, Commissioner Peirce’s remarks questioned whether the current executive compensation disclosure rules provide material information to investors, and raised concerns about costs to companies of providing the mandated disclosures, including the possibility of costs that arise from the “distortion of corporate behavior in response to executive compensation disclosure mandates.” Commissioner Uyeda also discussed the need for executive compensation disclosures to provide information “material to an informed investment or voting decision,” and warned against the use of the SEC disclosure rules to drive executive compensation decisions or seek to influence compensation practices. Commissioner Crenshaw, who provided written remarks in connection with the event, pointed out that executive compensation is an issue intertwined with issues of corporate responsibility and governance, and, noting “[i]t is a fundamental shareholder right – as the owner of a company’s equity – to obtain full and fair disclosure around the compensation of corporate executives,” urged consideration of investors’ views on materiality and decision-useful information, and costs beyond those incurred by issuers.
The roundtable was divided into three panels, the first focused on executive compensation determinations, and the second and third examined the specific SEC disclosure requirements. Panelists on the first panel sought to answer three questions: Who sets executive compensation, what factors influence the process of setting executive compensation; and what is the decision-making process in doing so? The panel highlighted the role of the compensation committee of the board of directors, compensation consultants and advisers, and management, and included a discussion of the role of investors and proxy advisory firms in the setting of executive compensation. As part of this discussion, the panelists raised certain disclosure requirements that may factor into the compensation-setting process, such as perks disclosure and the disclosure of equity awards.
The second and third panels included robust discussion of the current disclosure requirements. Overall, the focus of the conversations tended to be on the complexity of the framework, although there was not a clear consensus about whether improvements can be made to make the disclosure more effective for both issuers and investors. Many of the panelists representing issuers and their advisers called for a reduction or simplification of the requirements and a focus on materiality, while some of the investors represented on the panel focused more on the need for clear information to understand companies’ compensation decisions. Among other topics, the issue of personal security costs as a perk, and perks disclosure in general, was raised as an area ripe for SEC reconsideration. All three panels raised concerns about certain of the Dodd-Frank Act-mandated executive compensation rules, particularly the pay ratio and pay-versus-performance rules, as well as the clawback rules.
The SEC is currently accepting comments from the public on executive compensation related topics, presumably with an eye to proposing amendments to the rules in the future.