Pay for Performance and Pay Disparity Disclosure under the Dodd-Frank Wall Street Reform and Consumer Protection Act

September 22, 2010

The Dodd-Frank Wall Street Reform and Consumer Protection Act includes new disclosure requirements relating to executive compensation that will apply to U.S. public companies generally. Among these are requirements to disclose how executive pay and performance correlate and how CEO pay diverges from median employee pay. Both will require SEC rulemaking, and the SEC recently confirmed that it will not propose rules for either of them until at least April 2011 (click here for the SEC’s rulemaking timeline under the Act). Even without proposed rules in hand, there is much about the two requirements that is thought-provoking.

Regardless of the direction the SEC takes in its rulemaking proposals, the firm expects that these requirements will have important implications for public company executive compensation programs, practices and disclosures. Companies should not delay in considering these implications in light of their own circumstances as they prepare for the upcoming proxy season.