The Securities and Exchange Commission is considering ways to refine pending rules on how and when companies should recover executive pay tied to company performance, said David Fredrickson, associate director and chief counsel in the Division of Corporation Finance, the Wall Street Journal reported today. Companies are currently required to disclose how executive compensation is tied to company performance, including which financial metrics are used to benchmark company performance. There has been some debate among stakeholders about the regulator’s proposed company performance measure, total shareholder return. It remains the metric most consistent with the Commission’s framework, Fredrickson said. Companies and compensation attorneys argue that the proposed rule can be easily circumvented by disclosing less about pay-for-performance in their annual proxy statements. The proposed rules also would require companies to disclose recovery policies, and seek restitution of performance-based compensation, when a restatement would have affected executives’ pay due to previously reported results that were erroneous.
