Too little, too late? SEC adopts long-dormant pay vs. performance rule

After years of sitting on the shelf, the pay vs. performance rule mandated by the Dodd-Frank Act was adopted by the Securities and Exchange Commission (SEC) on Thursday.

The SEC reopened comment on the rule in January, its first action related to pay vs. performance since an initial comment period in 2015. Gary Gensler, chair of the agency, has committed early in his tenure to seeing through the unimplemented portions of Dodd-Frank, passed in 2010 in response to the 2008 financial crisis.

The pay vs. performance rule requires public companies to disclose information reflecting the relationship between executive compensation actually paid and the firm’s financial performance. The information must be included in accordance with Item 402 of Regulation S-K for the registrant’s five most recently completed fiscal years (three years for smaller reporting companies).