[Federal Register Volume 87, Number 22 (Wednesday, February 2, 2022)]
[Proposed Rules]
[Pages 5751-5759]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-02024]



[[Page 5751]]

=======================================================================
-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 229, 240, and 249

[Release No. 34-94074; File No. S7-07-15]
RIN 3235-AL00


Reopening of Comment Period for Pay Versus Performance

AGENCY: Securities and Exchange Commission.

ACTION: Proposed rule; reopening of comment period.

-----------------------------------------------------------------------

SUMMARY: The Securities and Exchange Commission (``Commission'') is 
reopening the comment period for its proposal to implement Section 
953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act 
of 2010 (``Dodd-Frank Act''). The proposed rule would amend the current 
executive compensation disclosure rule to require a description of how 
executive compensation actually paid by a registrant related to the 
financial performance of that company (``proposed rules''). The 
proposed rules were first set forth in a release published in the 
Federal Register on May 7, 2015 (Release No. 34-74835) (``Proposing 
Release''), and the related comment period ended on July 6, 2015. The 
reopening of this comment period is intended to allow interested 
persons further opportunity to analyze and comment upon the proposed 
pules in light of developments since the publication of the Proposing 
Release and our further consideration of the Section 953(a) mandate, 
including by responding to the additional requests for comment included 
in this release.

DATES: The comment period for the proposed rule published May 7, 2015, 
at 80 FR 26329, is reopened. Comments should be received on or before 
March 4, 2022.

ADDRESSES: Comments may be submitted by any of the following methods:

Electronic Comments

    <bullet> Use the Commission's internet comment form (https://www.sec.gov/rules/submitcomments.htm).

Paper Comments

    <bullet> Send paper comments to Vanessa A. Countryman, Secretary, 
Securities and Exchange Commission, 100 F Street NE, Washington, DC 
20549-1090.
All submissions should refer to File Number S7-07-15. This file number 
should be included on the subject line if email is used. To help us 
process and review your comments more efficiently, please use only one 
method. The Commission will post all comments on the Commission's 
website (http://www.sec.gov/rules/proposed.shtml). Comments also are 
available for website viewing and printing in the Commission's Public 
Reference Room, 100 F Street NE, Washington, DC 20549-1090 on official 
business days between the hours of 10 a.m. and 3 p.m. Operating 
conditions may limit access to the Commission's public reference room. 
All comments received will be posted without change. Persons submitting 
comments are cautioned that we do not redact or edit personal 
identifying information from comment submissions. You should submit 
only information that you wish to make available publicly.
    Studies, memoranda, or other substantive items may be added by the 
Commission or staff to the comment file during this rulemaking. A 
notification of the inclusion in the comment file of any such materials 
will be made available on our website. To ensure direct electronic 
receipt of such notifications, sign up through the ``Stay Connected'' 
option at www.sec.gov to receive notifications by email.

FOR FURTHER INFORMATION CONTACT: John Byrne, Special Counsel, in the 
Office of Small Business Policy, at (202) 551-3460, Division of 
Corporation Finance, Securities and Exchange Commission, 100 F Street 
NE, Washington, DC 20549.

SUPPLEMENTARY INFORMATION:

I. Background

    Section 953(a) of the Dodd-Frank Act added Section 14(i) to the 
Securities Exchange Act of 1934 \1\ (``Exchange Act''). Section 14(i) 
requires that the Commission adopt rules requiring issuers to disclose 
in any proxy or consent solicitation material for an annual meeting of 
shareholders a clear description of any compensation required to be 
disclosed under 17 CFR 229.402 (``Item 402 of Regulation S-K''), 
including information that shows the relationship between executive 
compensation actually paid and the financial performance of the issuer, 
taking into account any change in the value of the shares of stock and 
dividends of the issuer and any distributions. Section 14(i) further 
provides that the disclosure may include a graphic representation of 
the information required to be disclosed.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78a et seq.
---------------------------------------------------------------------------

    As described more fully in the Proposing Release,\2\ the proposed 
rules would add new 17 CFR 229.402(v) (``Item 402(v) of Regulation S-
K''), which would require registrants to describe how the executive 
compensation actually paid by the registrant related to the financial 
performance of the registrant over the time horizon of the disclosure. 
The proposed rules would use cumulative total shareholder return 
(``TSR''), as defined in 17 CFR 229.201(e) (``Item 201(e) of Regulation 
S-K''),\3\ as the measure of financial performance. Under the proposed 
rules, the following tabular disclosures would be required, with the 
asterisked items indicating portions of the proposed rules from which 
smaller reporting companies (``SRCs'') \4\ would be exempt: \5\
---------------------------------------------------------------------------

    \2\ See Pay Versus Performance, Release No. 34-74835 (Apr. 29, 
2015) [80 FR 26329 (May 7, 2015)].
    \3\ Item 201(e) of Regulation S-K sets forth the specific 
disclosure requirements for the issuer's stock performance graph, 
which is required to be included in the annual report to security 
holders required by 17 CFR 240.14a-3 and 240.14c-3. The Item 
provides that cumulative total shareholder return is calculated by 
``dividing the sum of the cumulative amount of dividends for the 
measurement period, assuming dividend reinvestment, and the 
difference between the registrant's share price at the end and the 
beginning of the measurement period; by the share price at the 
beginning of the measurement period.''
    \4\ A ``smaller reporting company'' means an issuer that is not 
an investment company, an asset-backed issuer, or a majority-owned 
subsidiary of a parent that is not a smaller reporting company and 
that: (1) Had a public float of less than $250 million (as of the 
last business day of the issuer's most recently completed second 
fiscal quarter); or (2) had annual revenues of less than $100 
million (as of the most recently completed fiscal year for which 
audited financial statements are available) and either: (i) No 
public float (as of the last business day of the issuer's most 
recently completed second fiscal quarter); or (ii) a public float of 
less than $700 million (as of the last business day of the issuer's 
most recently completed second fiscal quarter). 17 CFR 240.12b-2. 
Business development companies, which are a type of closed-end 
investment company that is not registered under the Investment 
Company Act, do not fall within the SRC definition.
    \5\ The Commission amended the SRC definition effective 
September 2018. See Amendments to the Smaller Reporting Company 
Definition, Release No. 33-10513 (June 28, 2018) [83 FR 31992 (July 
10, 2018)]. Based on staff analysis of filings in 2019, 
approximately 45 percent of registrants subject to the Proposed 
Rules would be SRCs and thus would be exempt from the asterisked 
disclosure, compared to approximately 40 percent at the time of 
publication of the Proposed Rules. Estimates based on 2020 filings 
would reflect a more modest change in the proportion of SRCs, but 
may undercount SRCs due to a greater number of registrants, 
particularly small ones, being late to file than in prior years.

[[Page 5752]]



----------------------------------------------------------------------------------------------------------------
                                                      Average
                      Summary                         summary         Average                       Peer group
                   compensation    Compensation    compensation    compensation        Total           total
      Year          table total    actually paid    table total    actually paid    shareholder     shareholder
                      for PEO         to PEO        for non-PEO   to non-PEO NEO      return         return *
                                                        NEO
(a)                          (b)             (c)             (d)             (e)             (f)             (g)
----------------------------------------------------------------------------------------------------------------
Y1..............  ..............  ..............  ..............  ..............  ..............  ..............
Y2..............  ..............  ..............  ..............  ..............  ..............  ..............
Y3..............  ..............  ..............  ..............  ..............  ..............  ..............
Y4 *............  ..............  ..............  ..............  ..............  ..............  ..............
Y5 *............  ..............  ..............  ..............  ..............  ..............  ..............
----------------------------------------------------------------------------------------------------------------

    Specifically, the proposed rules would:
    <bullet> Apply to a registrant's ``named executive officers'' 
(``NEOs'') as defined in 17 CFR 229.402(a)(3); \6\
---------------------------------------------------------------------------

    \6\ 17 CFR 229.402(a)(3) defines the NEOs for whom Item 402 of 
Regulation S-K executive compensation is required as (1) all 
individuals serving as the registrant's principal executive officer 
(``PEO'') or acting in a similar capacity during the last completed 
fiscal year, regardless of compensation level, (2) all individuals 
serving as the registrant's principal financial officer (``PFO'') or 
acting in a similar capacity during the last completed fiscal year, 
regardless of compensation level, (3) the registrant's three most 
highly compensated executive officers other than the PEO and PFO who 
were serving as executive officers at the end of the last completed 
fiscal year, and (4) up to two additional individuals for whom Item 
402 of Regulation S-K disclosure would have been provided but for 
the fact that the individual was not serving as an executive officer 
of the registrant at the end of the last completed fiscal year. For 
SRCs, the Proposed Rules would apply to the scaled number of NEOs 
included in 17 CFR 229.402(m)(2).
---------------------------------------------------------------------------

    <bullet> Address the Section 953(a) of the Dodd-Frank Act required 
measure of ``executive compensation actually paid'' (emphasis added) by 
using, as a starting point, the total compensation that is already 
required to be disclosed in the Summary Compensation Table.\7\ For the 
PEO, the total PEO compensation from the Summary Compensation Table 
would be disclosed in column (b) of the new table; and, for NEOs, the 
average of their total compensation from the Summary Compensation Table 
would be disclosed in column (d) of the new table. The following two 
adjustments to the disclosure in the Summary Compensation Table would 
be made to determine the executive compensation amounts ``actually 
paid'' (columns (c) and (e) of the new table):
---------------------------------------------------------------------------

    \7\ 17 CFR 229.402(c). SRCs would provide the scaled Summary 
Compensation Table disclosure in 17 CFR 229.402(n).
---------------------------------------------------------------------------

    1. Exclude changes in actuarial present value of benefits under 
defined benefit and actuarial pension plans that are not attributable 
to the applicable year of service; \8\ and
---------------------------------------------------------------------------

    \8\ As proposed, SRCs would not be required to disclose and 
exclude amounts related to pensions for purposes of disclosing 
executive compensation actually paid because they are subject to 
scaled compensation disclosure that does not include pension plans.
---------------------------------------------------------------------------

    2. Include the value of equity awards at vesting rather than when 
granted.
    <bullet> Require the executive compensation amounts actually paid 
to be presented separately for the PEO, and as an average for the 
remaining NEOs;
    <bullet> Require a registrant's TSR, as defined in Item 201(e) of 
Regulation S-K, and the TSR of the registrant's peer group as measures 
of financial performance (columns (f) and (g) of the new table);
    <bullet> Require a registrant to use the information in the above 
table to provide a clear description of (1) the relationship between 
executive compensation actually paid to the registrant's NEOs and the 
cumulative TSR of the registrant, and (2) the relationship between the 
registrant's TSR and the TSR of a peer group chosen by the registrant, 
in each case over the registrant's five most recently completed fiscal 
years;
    <bullet> For SRCs, require the disclosure of the relationship 
between executive compensation actually paid and TSR over the 
registrant's three most recently completed fiscal years, without 
requiring these registrants to provide disclosure of peer group TSR; 
and
    <bullet> Require that the disclosure be provided in a structured 
data language using the Inline eXtensible Business Reporting Language 
(``Inline XBRL'').\9\
---------------------------------------------------------------------------

    \9\ In 2015, the Commission proposed requiring the structured, 
machine-readable eXtensible Business Reporting Language (``XBRL'') 
for the tagging requirements in the Proposed Rule. The Commission 
subsequently adopted rules replacing XBRL tagging requirements for 
registrant financial statements with Inline XBRL tagging 
requirements. As a result of those changes, we are considering using 
Inline XBRL, rather than XBRL, for the proposed tagging 
requirements. See infra footnote 25.
---------------------------------------------------------------------------

    Registrants would also be permitted to provide supplemental 
measures of compensation and/or financial performance, or other 
supplemental disclosures, so long as any additional disclosure is 
clearly identified, not misleading and not presented with greater 
prominence than the required disclosure.
    The Commission proposed applying the rule to all reporting 
companies except foreign private issuers, registered investment 
companies, and Emerging Growth Companies (``EGCs'').\10\
---------------------------------------------------------------------------

    \10\ ``Emerging growth company'' means an issuer that had total 
annual gross revenues of less than $1.07 billion during its most 
recently completed fiscal year. An issuer that is an emerging growth 
company as of the first day of that fiscal year shall continue to be 
deemed an emerging growth company until the earliest of: (i) The 
last day of the fiscal year of the issuer during which it had total 
annual gross revenues of $1.07 billion or more; (ii) the last day of 
the fiscal year of the issuer following the fifth anniversary of the 
date of the first sale of common equity securities of the issuer 
pursuant to an effective registration statement under the Securities 
Act of 1933 [15 U.S.C. 77a et seq.]; (iii) the date on which such 
issuer has, during the previous three year period, issued more than 
$1 billion in non-convertible debt; or (iv) the date on which such 
issuer is deemed to be a large accelerated filer. 17 CFR 240.12b-2. 
Section 102(a)(2) of the Jumpstart Our Business Startups Act amended 
Exchange Act Section 14(i) to exclude registrants that are EGCs from 
the pay-versus-performance disclosure requirements. Public Law 112-
106, 126 Stat. 306 (2012). In accordance with this provision, the 
Commission did not propose to require EGCs to provide pay-versus-
performance disclosure. As proposed, business development companies 
would be treated in the same manner as issuers other than registered 
investment companies and, therefore, would be subject to the 
disclosure requirement of proposed new Item 402(v) of Regulation S-
K.
---------------------------------------------------------------------------

II. Reopening of Comment Period

    Section 953(a) of the Dodd-Frank Act was enacted in 2010 and the 
proposed rules were published in 2015. Since the proposed rules were 
published, executive compensation practices related to company 
performance have continued to develop and evolve,\11\ to

[[Page 5753]]

the point that we believe interested persons should be given a further 
opportunity to analyze and comment upon the proposed rules. In 
addition, as described below, we are considering whether additional 
requirements would better implement the Section 953(a) mandate by 
providing investors with additional decision-relevant data.
---------------------------------------------------------------------------

    \11\ For example, there has been a continued increase in the 
prevalence of performance-contingent share plans and a decrease in 
the use of stock options to compensate CEOs among S&P 500 and 
Russell 3000 companies. See, e.g., Pay Governance (Jan. 2021), S&P 
500 CEO Compensation Increase Trends, available at 
www.paygovernance.com/viewpoints/s-p-500-ceo-compensation-increase-trends-4; and Gallagher (February 2021), CEO and Executive 
Compensation Practices Report: 2020 Edition, available at 
www.ajg.com/us/news-and-insights/2021/feb/ceo-executive-compensation-practices-report-2020/. See also, Meridian Compensation 
Partners, LLC, 2020 Trends and Developments in Executive 
Compensation (April 30, 2020), available at https://www.meridiancp.com/wp-content/uploads/Meridian-2020-Trends-and-Developments-Survey-Final.pdf (summarizing responses to a survey 
from 108 companies, and discussing, among other developments, a 
decline in the use of TSR as the sole performance metric in long-
term incentive plans, from 47% in 2016 to 30% in 2020, and the 
recent use by some companies of TSR as a modifier to results 
initially determined by one or more other financial metrics). Also, 
the COVID-19 pandemic has affected both how and the extent to which 
companies recently have tied executive compensation to company 
performance. See, e.g., A. Batish, et al., Sharing the Pain: How Did 
Boards Adjust CEO Pay in Response to COVID-19?, Rock Center for 
Corporate Governance at Stanford University Closer Look Series: 
Topics, Issues and Controversies in Corporate Governance No. CGRP-86 
(Sep. 1, 2020), available at https://ssrn.com/abstract=3682766 
(analyzing compensation disclosure from all Russell 3000 companies 
between January 1 and June 30, 2020, and finding ``502 companies (17 
percent) made adjustments to CEO salary, bonus, or long-term 
incentive programs (LTIPs), or director fees during this measurement 
period,'' with 92 companies making adjustments to annual bonus 
programs and 33 companies making changes to their long-term 
incentive programs).
---------------------------------------------------------------------------

    Section 953(a) of the Dodd-Frank Act does not specify how to 
measure an issuer's ``financial performance.'' However, the statutory 
language requires that ``financial performance . . . [take] into 
account any change in the value of the shares of stock and dividends of 
the issuer and any distributions.'' Consistent with this language, the 
Commission proposed requiring TSR (as defined in Item 201(e) of 
Regulation S-K) as the measure of ``financial performance'' of the 
registrant. The Commission also proposed TSR because, among other 
reasons, it is:
    <bullet> Consistently calculated and should increase comparability 
across registrants;
    <bullet> Objectively determinable and not open to subjective 
determinations of performance; and
    <bullet> A measure for which disclosure is already required and 
with which shareholders are familiar, so its use was intended to 
mitigate the burdens both to registrants to provide the disclosure and 
to investors to analyze the new disclosure.
    We are considering requiring registrants to disclose, in addition 
to their TSR and the TSR of their peer group, certain other measures of 
performance, which could provide additional clarity to investors as to 
the relation between executive compensation and financial performance. 
Specifically, we are considering requiring disclosure in tabular form 
of the following three additional measures: Pre-tax net income, net 
income, and a measure specific to a particular registrant, chosen by 
said registrant (the ``Company-Selected Measure''). As noted in the 
Proposing Release, registrants would be required to provide a clear 
description of the relationship among the measures provided in the 
tabular form (including these three additional measures we are 
considering requiring), but would be allowed to choose the format used 
to present the relationship, such as a graph or narrative description.
    The first two additional measures of financial performance under 
consideration--pre-tax net income and net income--are already provided 
for under U.S. Generally Accepted Accounting Principles (``U.S. GAAP'') 
\12\ and, accordingly, are familiar to investors and registrants. We 
are considering whether to require registrants to disclose these 
measures in two additional columns to the table described in the 
Proposing Release and shown above. Because these measures reflect a 
registrant's overall profits and are net of costs and expenses, we 
believe they are additional important measures of company financial 
performance that may be relevant to investors in evaluating executive 
compensation. We believe using a company's pre-tax net income and net 
income could complement the market-based performance measure required 
in the Proposing Release by also providing accounting-based measures of 
financial performance. To the extent that these measures would 
otherwise be considered by investors when evaluating the alignment of 
pay with performance, including pre-tax net income and net income as 
additional measures of performance in the proposed table may lower the 
burden of analysis for those investors by presenting this existing 
information together in a way that could make it easier to understand 
how pay relates to performance.
---------------------------------------------------------------------------

    \12\ Net income is required to be disclosed in financial 
statements. While some registrants are not explicitly required to 
present pre-tax net income in their financial statements, U.S. GAAP 
includes presentation and disclosure requirements that result in 
information sufficient to calculate pre-tax net income, and these 
registrants often do present pre-tax net income.
---------------------------------------------------------------------------

    We are also considering whether to require registrants to disclose, 
as an additional column to the above table, a third new measure--the 
Company-Selected Measure--that in the registrant's assessment 
represents the most important performance measure (that is not already 
included in the table) \13\ used by the registrant to link compensation 
actually paid during the fiscal year to company performance, over the 
time horizon of the disclosure. We believe that requiring registrants 
to select their own measure rather than mandating a further specific 
measure may elicit additional useful disclosure while reducing the 
risk, identified by commenters on the Proposing Release,\14\ of 
misrepresenting or providing an incomplete picture of how pay relates 
to performance given the differences across companies in terms of 
performance measures that companies or investors care about and the 
questions about whether a ``one size fits all'' benchmark is 
appropriate for all companies.
---------------------------------------------------------------------------

    \13\ If the registrant's most important performance measure were 
already included in the table, the registrant would disclose its 
next-most important measure as its Company-Selected Measure. For 
example, if the registrant's most important measure were TSR, its 
second most important measure were pre-tax net income, and its third 
most important measure were EBITDA, the registrant would include 
EBITDA as its Company-Selected Measure. If a registrant did not use 
any measures other than those already included in the table, it 
would indicate that fact in its disclosure.
    \14\ See, e.g., letters from Business Roundtable dated July 6, 
2015, Celanese Corp. dated June 12, 2015, Steven Hall & Partners 
dated July 6, 2015, Hyster-Yale Materials Handling, Inc. dated June 
10, 2015, PNC Financial Services Group, Inc. dated July 6, 2015, and 
Simpson Thacher & Bartlett LLP dated July 6, 2015 (each opposing the 
use of TSR as the sole measure of financial performance and 
suggesting providing registrants the ability to choose their own 
performance measure). Comment letters received in response to the 
Proposing Release are available at https://www.sec.gov/comments/s7-07-15/s70715.shtml. In addition, in a review of the CD&As of around 
20 of the largest Fortune 500 companies, the staff noted that, among 
these companies, there were over 100 unique performance measures, 
almost all of which were company-specific or adjusted measures.
---------------------------------------------------------------------------

    For reference, the three additional measures we are considering 
requiring would be part of the table in the proposed rules as follows: 
\15\
---------------------------------------------------------------------------

    \15\ The title of column (j) of the table, ``Company-Selected 
Measure,'' would be replaced with the name of the registrant's most 
important measure, and that column would include the numerically 
quantifiable performance of the issuer under such measure for each 
covered fiscal year. For example, if the Company Selected Measure 
for the most recent fiscal year was EBITDA, the company would 
disclose its quantified EBITDA performance in each covered fiscal 
year. The asterisked items indicate disclosures we are considering 
not requiring SRCs to provide. See below for a discussion of our 
considerations with respect to SRC disclosure requirements.

[[Page 5754]]



--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                Average
                                    Summary                     summary       Average                  Peer group
                                 compensation  Compensation  compensation  compensation     Total        total     Pre-tax net   Net income   [Company-
              Year                table total    actually     table total    actually    shareholder  shareholder     income       (loss)      selected
                                    for PEO     paid to PEO   for non-PEO  paid to non-     return      return *      (loss)                  measure] *
                                                                 NEOs        PEO NEOs
(a)                                       (b)           (c)           (d)           (e)          (f)          (g)          (h)          (i)          (j)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Y1.............................  ............  ............  ............  ............  ...........  ...........  ...........  ...........  ...........
Y2.............................  ............  ............  ............  ............  ...........  ...........  ...........  ...........  ...........
Y3.............................  ............  ............  ............  ............  ...........  ...........  ...........  ...........  ...........
Y4 *...........................  ............  ............  ............  ............  ...........  ...........  ...........  ...........  ...........
Y5 *...........................  ............  ............  ............  ............  ...........  ...........  ...........  ...........  ...........
--------------------------------------------------------------------------------------------------------------------------------------------------------

    In addition to potentially including the Company-Selected Measure 
in the table described in the Proposing Release, we are considering 
whether to separately require registrants to provide a list of their 
five most important performance measures used by the registrant to link 
compensation actually paid during the fiscal year to company 
performance, over the time horizon of the disclosure, in order of 
importance. If the registrant considers fewer than five performance 
measures when it links compensation actually paid during the fiscal 
year to company performance, the registrant would be required to 
disclose only the number of measures it actually considers.\16\ We are 
considering whether to require this list to be in a tabular format. We 
note that some commenters to the Proposing Release suggested revising 
the Proposed Rules to require, in addition to TSR, the quantitative 
metrics or key performance targets companies actually use to set 
executive pay.\17\ Currently, the Compensation Discussion and Analysis 
(``CD&A'') requirements in Item 402 of Regulation S-K include requiring 
a registrant to explain all material elements of the compensation paid 
to its NEOs.\18\ The item further specifies that examples of this 
material information may include how executive compensation relates to 
company performance such as:
---------------------------------------------------------------------------

    \16\ Throughout this release, we reference the ``five'' most 
important performance measures. If the registrant considers fewer 
than five performance measures, all references to the ``five'' most 
important performance measures should be read as the number of 
performance measures the registrant considers, if less than five.
    \17\ See, e.g., letters from the American Federation of Labor 
and Congress of Industrial Organizations dated June 30, 2015, 
Council of Institutional Investors dated June 25, 2015, and Public 
Citizen dated July 6, 2015.
    \18\ See 17 CFR 229.402(b)(1).
---------------------------------------------------------------------------

    <bullet> What specific items of corporate performance are taken 
into account in setting compensation policies and making compensation 
decisions;
    <bullet> How specific forms of compensation are structured and 
implemented to reflect these items of corporate performance; and
    <bullet> How specific forms of compensation are structured and 
implemented to reflect the NEOs' individual performance and/or 
individual contribution to these items of the company's 
performance.\19\
---------------------------------------------------------------------------

    \19\ These specific examples are set forth in 17 CFR 
229.402(b)(2)(v) through (vii).
---------------------------------------------------------------------------

    Generally, discussion of these topics in the CD&A tends to be 
prospective in nature and focused on the design of the registrant's 
compensation program. However, there is no existing rule that 
specifically mandates disclosure of the performance measures that 
actually determined the level of recent NEO compensation actually paid. 
Tabular disclosure of a list of the five most important performance 
measures that drove compensation actually paid may be useful to 
investors in addition to the more detailed disclosure related to the 
consideration of the registrant's corporate performance and individual 
performance in the design of NEO compensation required in the CD&A. 
This tabular disclosure may enable investors to more easily assess 
which performance metrics actually have the most impact on compensation 
actually paid and make their own judgments as to whether compensation 
appropriately incentivizes management. The disclosure of the five most 
important performance measures that drove compensation actually paid 
may also provide investors with context that could be useful in 
interpreting the remainder of the pay versus performance disclosure.
    For reference, we are considering requiring the five performance 
measures, as applicable, to be disclosed in the following tabular 
format:

  Five Most Important Company Performance Measures for Determining NEO
                              Compensation
------------------------------------------------------------------------
 
------------------------------------------------------------------------
1.                                  Measure 1.
2.                                  Measure 2.
3.                                  Measure 3.
4.                                  Measure 4.
5.                                  Measure 5.
------------------------------------------------------------------------

    In our consideration of such a tabular requirement, we note that 
registrants would be able to cross-reference to existing disclosures 
elsewhere in the disclosure document that describe the various 
processes and calculations that go into determining NEO compensation as 
it relates to these performance measures, if they elected to do so.
    We believe that including a tabular list of those performance 
measures that drove recent compensation actually paid may help address 
concerns that using only TSR may mislead investors or provide an 
incomplete picture of performance. In addition, as referenced above 
with respect to the Company-Selected Measure, we believe the inclusion 
of a registrant's five most important performance measures may better 
reflect the differences across companies.
    We believe that the proposed rules, along with the additional 
disclosures we are considering, as detailed above, may facilitate the 
analysis of registrants' executive compensation actually paid in 
relation to company performance. In particular, as discussed above, 
each of the additional disclosures under consideration may broaden the 
picture of financial performance presented in the disclosure. This 
additional detail and context could enhance the usefulness of the 
disclosure by certain registrants or for certain investors. We 
recognize that the benefits of such disclosure would depend on the 
degree to which the elements of the disclosure align with the factors 
that investors seek to understand when considering pay in relation to 
performance.
    As is the case with the proposed rules, we recognize that it is 
possible that shareholders may bear information processing costs 
resulting from any additional elements required to be included in the 
disclosure, if the new requirements increase the length and complexity 
of existing disclosures without significantly adding to the ease of 
interpretation. The additional elements under consideration could also 
reduce the benefits of the disclosure required by the Proposed Rules if 
they complicate or obscure the elements of

[[Page 5755]]

the proposed disclosure that would be most helpful to investors.
    We also acknowledge that each additional requirement could increase 
reporting costs for registrants. However, we believe the costs to 
registrants of providing the disclosures we are considering in addition 
to those described in the proposed rules likely would be relatively 
low. Specifically, pre-tax net income and net income are generally 
presented in the financial statements of registrants, and, therefore, 
we believe there should be minimal additional costs to include those 
measures in the proposed new table. That said, prescribing additional 
measures whose relation to compensation must be clearly described 
increases the cost of producing the disclosure as well as the risk that 
some of these measures may not be as relevant for some issuers and that 
these issuers may therefore feel the need to include clarifying 
disclosures. The Company-Selected Measure and the other four most 
important performance measures are already considered by registrants in 
making executive compensation determinations and may already be 
discussed, in a different form, in the CD&A. While identifying and 
ranking the Company-Selected Measure and the other four measures may 
require some incremental consideration and additional computations, we 
expect that their disclosure should result in limited additional costs, 
though registrants with more complex compensation packages involving 
more performance measures may bear relatively greater costs.
    As is the case with the proposed rules, we expect the effect of the 
additional disclosures we are considering to have limited other effects 
on efficiency, competition and capital formation. If the proposed 
disclosures were either to facilitate or complicate the task of 
understanding executive pay policies, they may marginally increase or 
decrease the informational efficiency of markets, respectively. The 
proposed amendments and the additional disclosures we are considering 
could also lead to indirect effects if the disclosures lead to changes 
in compensation packages. As discussed in the Proposing Release, we 
believe such changes are unlikely due to the high level of existing 
attention to pay practices and the limited new information that would 
be disclosed. Finally, the disclosure of the ranking of the list of the 
most important performance measures could negatively affect competition 
if this information is sensitive and has competitive value.
    To address concerns about burdens on smaller registrants, we are 
considering whether and how the proposed rules and the potential 
disclosure of additional measures we are considering would apply to 
SRCs. Under existing rules, SRCs are subject to abbreviated executive 
compensation disclosure requirements.\20\ For example, SRCs are not 
required to provide a CD&A but are instead permitted to produce a more 
limited, narrative disclosure. To minimize costs for SRCs and 
consistent with the treatment of SRCs in many other areas, the 
Commission proposed permitting SRCs to provide scaled disclosure under 
the proposed rules. For example, and as indicated by the asterisked 
portions of the table described in the Proposing Release and shown 
above in Section I of this release, under the Proposed Rules, SRCs 
would not be required to provide the peer group TSR, as they are exempt 
from providing this disclosure under existing rules.\21\
---------------------------------------------------------------------------

    \20\ See 17 CFR 229.402(l) through (r).
    \21\ See Instructions to Item 201(e) of Regulation S-K.
---------------------------------------------------------------------------

    With respect to the potential disclosure of additional measures, 
pre-tax net income and net income are already provided for under U.S. 
GAAP, and therefore we are considering requiring SRCs to disclose such 
measures. In contrast, the current abbreviated executive compensation 
disclosure requirements applicable to SRCs do not require them to 
provide a CD&A, and thus do not specifically call for disclosure about 
how executive compensation relates to company performance. Accordingly, 
and unlike other reporting companies, requiring SRCs to disclose a 
Company-Selected Measure and a list of their five most important 
performance measures would be a new disclosure obligation that SRCs 
would not be able to satisfy by drawing upon or cross-referencing to 
existing disclosures. We therefore are considering not requiring SRCs 
to disclose a Company-Selected Measure and a list of their five most 
important performance measures.
    In light of developments in executive compensation practices 
related to company performance since the publication of the Proposing 
Release, and our further consideration of how best to implement the 
mandate of Section 953(a) of the Dodd-Frank Act, we are reopening the 
comment period for the proposed rules until March 4, 2022 to provide 
the public with an additional opportunity to analyze and comment on the 
proposed rules as well as the additional measures we are considering. 
Commenters may submit, and the Commission will consider, comments on 
any aspect of the proposed rules or the additional measures we are 
considering. All comments received to date on the proposed rules will 
be considered and need not be resubmitted. Comments are particularly 
helpful if accompanied by quantified estimates or other detailed 
analysis and supporting data about the issues addressed in those 
comments. In addition to the requests for comment included in the 
Proposing Release, the Commission specifically seeks comments on the 
following:

Request for Comment

    1. Should disclosure of additional financial performance measures 
beyond TSR be required? Specifically, would investors find it useful to 
have pre-tax net income and net income presented in tabular format 
alongside the other metrics that would be required by the Proposing 
Release? Would these two additional metrics help investors to 
appropriately evaluate the relationship between executive compensation 
actually paid and the financial performance of the registrant? Would 
the inclusion of these measures alleviate concerns previously raised by 
commenters on the proposed rules about including only TSR and peer 
group TSR in this disclosure? Would their inclusion complicate the 
disclosure such that its usefulness could be reduced? Should we also 
require that these measures, if any, be discussed in the required 
description (which may be, e.g., narrative or graphical) that 
accompanies the tabular disclosure? Instead of requiring additional 
financial performance measures, should we instead include pre-tax net 
income and net income as examples of additional measures registrants 
could elect to disclose if they believed such disclosure would be 
beneficial for them? What would the benefits or drawbacks be of that 
approach?
    2. Are there other measures of company performance that we should 
consider mandating in addition to or in lieu of pre-tax net income and/
or net income? If so, which additional or alternative measures should 
we require and why? How would these additional or alternative measures 
be useful for investors in measuring company performance? Should we 
also require that these measures, if any, be discussed in the required 
description (which may be, e.g., narrative or graphical) that 
accompanies the tabular disclosure?
    3. How should we define the Company-Selected Measure, if we were to 
require its disclosure? We are considering defining the Company-
Selected Measure as the measure that in

[[Page 5756]]

the registrant's assessment represents the most important performance 
measure (that is not already included in the table) used by the 
registrant to link compensation actually paid during the fiscal year to 
company performance. Would such a definition provide sufficient clarity 
to a registrant as to what to disclose? What computations or 
considerations would be required in determining the Company-Selected 
Measure and what would be the associated costs for registrants? Should 
we require registrants to disclose the methodology used to calculate 
the Company-Selected Measure? Should that consideration depend on 
whether the measure is already disclosed in the Company's financial 
statements?
    4. Should we require the Company-Selected Measure to be the most 
important measure used by the registrant in a performance or market 
condition in the context of an incentive plan as defined in 17 CFR 
229.402(a)(6)(iii)? \22\ Would including such a measure in the tabular 
disclosure allow investors to better evaluate the extent to which the 
total compensation reported as actually paid reflects the performance 
the company explicitly chose to incentivize, and if so would such an 
evaluation be useful to investors? Should the Company-Selected Measure 
instead be the performance measure that is deemed most important by the 
registrant whether or not it is used in a performance or market 
condition in the context of an incentive plan (i.e., including the 
effect of stock price movements on equity incentive plan compensation, 
even in the absence of a market condition; or measures that affect non-
incentive plan compensation, such as the retrospective use of 
performance measures in determining compensation reportable in the 
bonus column of the Summary Compensation Table \23\)?
---------------------------------------------------------------------------

    \22\ See also Release No. 33-8732A, Executive Compensation and 
Related Person Disclosure (Aug. 29, 2006) [71 FR 53158] (``2006 
Adopting Release'') at n. 167 (discussing the use of performance 
conditions and market conditions in equity incentive plans).
    \23\ See 2006 Adopting Release at Section II.C.1.f for a 
discussion of the distinction between compensation reportable as 
bonuses and compensation reportable as non-equity incentive plan 
compensation.
---------------------------------------------------------------------------

    5. We recognize that there could be varying methods of evaluating 
which measures are the most important. Should we define ``most 
important'' for the purpose of the selection of the Company-Selected 
Measure, as well as for the ranking of any other measures, if required? 
If so, how? For example, should the ``most important'' measure be the 
one on which the highest aggregate dollars of compensation actually 
paid were contingent? Or should ``importance'' be based on the dollar 
impact of the measure's variation from its initial or expected level on 
compensation actually paid, whether positive or negative? Instead, 
should ``importance'' be weighed based on what considerations drove the 
registrant's executive compensation decisions rather than its executive 
compensation outcomes? Alternatively, should we not specify a 
particular method to use to evaluate the relative importance of a 
performance measure in driving compensation actually paid or define 
``most important,'' and instead allow registrants to determine what 
they consider to be ``important'' for this purpose and select the 
Company-Selected Measure accordingly, with disclosure explaining how 
they made their choice? Instead of requiring that the ``most 
important'' measure be the measure generally used by the registrant to 
link compensation actually paid to company performance, should we 
require that the ``most important'' measure be the measure specifically 
used by the registrant to link only PEO compensation actually paid to 
company performance? What would the benefits and drawbacks be of 
narrowing the definition of ``most important'' to only PEO 
compensation?
    6. What disclosure should be required if different measures are 
important in different years or if different measures determine 
compensation actually paid for the different NEOs? Would aggregating 
the NEOs for purposes of determining the most important measure be 
difficult, given that some NEOs may have their compensation linked to 
industry- or segment-specific performance measures, which are not used 
for other NEOs? If so, are there ways to mitigate these differences to 
provide useful disclosures for investors? What if different measures 
contribute equally to determining compensation actually paid? If the 
measure deemed most important is already included among the performance 
measures in the Proposed Rules or among the additional measures we are 
considering in this release, should the company be permitted to 
designate that measure as the Company-Selected Measure, or should the 
company be required to disclose an additional significant measure, such 
as the next-most important measure not already disclosed, as the 
Company-Selected Measure? What would the impact of either approach be 
on the usefulness of disclosure of the Company-Selected Measure? If we 
permit a registrant to designate TSR, peer group TSR, pre-tax net 
income, or net income as the Company-Selected Measure, or if a 
registrant did not use any measures other than those already included 
in the table, how should it indicate that fact in its disclosure? For 
example, should the registrant be required to include in the Company-
Selected Measure column duplicate disclosure of the measure already 
included in the table, or should the registrant be required to include 
a note to the measure already included in the table indicating that 
measure is also the registrant's Company-Selected Measure?
    7. Would mandated disclosure of the Company-Selected Measure be 
useful to investors when placed alongside the metrics that would be 
required by the Proposing Release? How would these benefits, if any, 
compare to those of any supplemental financial performance measures 
that would voluntarily be disclosed by registrants in the absence of 
such a mandate? Would there be challenges to registrants to presenting 
information about the Company-Selected Measure in tabular form? If so, 
how could we elicit comparable disclosure while also allowing 
registrants flexibility in presenting this information to accommodate 
their particular facts and circumstances? Is there another format we 
should consider for the Company-Selected Measure? Should we 
specifically limit any Company-Selected Measure only to those measures 
that relate to the financial performance of the registrant? Or should 
we allow the Company-Selected measure to be any measure that could be 
disclosed under the existing CD&A requirements, including financial 
performance measures; environmental, social and governance related 
measures; or any other measures used by the registrant to link 
compensation actually paid during the fiscal year to company 
performance?
    8. We are considering requiring the one Company-Selected Measure 
that is the most important measure over the time horizon of the 
disclosure to be identified in the table, and issuers would provide 
information about that measure, including the numerically quantifiable 
performance of the issuer with respect to that measure, for all of the 
years in the table. Would investors find such a presentation useful? 
Would there be challenges to registrants to presenting this information 
for all years? Should we instead allow companies to change their 
Company-Selected Measure from year to year, such that they would 
disclose in the table a potentially different Company-Selected

[[Page 5757]]

Measure for each respective year? Would doing so have any impact on 
investors' ability to understand how pay relates to performance and 
compare across different years? If we do require a registrant to 
disclose one Company-Selected Measure to be identified in the table, 
and that registrant elects to change what that measure is in 
consecutive years, should we require that registrant to separately 
disclose in additional columns, or narratively, the Company-Selected 
Measures used in the table in prior years? How often do registrants 
change, from year to year, their primary performance measures used by 
the registrant to link executive compensation during a fiscal year to 
company performance?
    9. Would a tabular list of a registrant's five most important 
performance measures used to determine compensation actually paid be 
useful to investors in addition to existing disclosures? As in the case 
of the Company-Selected Measure above, how should we define 
``importance'' and how should performance measures be ranked for this 
purpose, particularly if multiple performance targets apply to the same 
elements of compensation? Should we require disclosure of the five most 
important performance measures or some other number of performance 
measures? Would the inclusion of an additional tabular list of a 
registrant's five most important performance measures dilute the impact 
of, or otherwise lead to confusion regarding, the table that would be 
required by the Proposing Release? Should we require that the five 
measures be listed in order of importance? How could we increase the 
usefulness of the tabular list of a registrant's five most important 
performance measures for investors? Should there be disclosure of the 
methodology behind those measures?
    10. What would be the cost to registrants of any computations 
required to identify and rank the five most important performance 
measures? If registrants do not currently rank their performance 
measures, would requiring them to list their five most important 
performance measures in order of importance be unduly burdensome? Would 
such disclosure contain information that is sensitive or has 
competitive value to a registrant? Should an exemption from any 
requirement to disclose the five most important performance measures be 
available if the disclosure would contain such sensitive or competitive 
information? If so, how should we specify the scope of any such 
exemption?
    11. What if a registrant's five most important performance measures 
include measures that are included in the proposed rules or the 
additional measures we are considering? Should registrants be permitted 
to disclose fewer than five measures if they deem fewer than five to be 
important or if they consider fewer than five measures?
    12. Would a tabular format help investors locate, use and 
understand disclosure of the five most important performance measures? 
Are there practical or other considerations that would make such 
tabular disclosure challenging or unduly burdensome for registrants? 
Would this format impede registrants from providing meaningful 
disclosure about their primary performance measures that factor into 
determining pay?
    13. Should we, either in addition to or in lieu of the proposed 
rules and the disclosure of the additional measures we are considering, 
revise Item 402 of Regulation S-K to explicitly require registrants to 
disclose all of the performance measures that actually determine NEO 
compensation? If registrants are already providing this disclosure, are 
there ways we could improve this disclosure? For example, do investors 
find current disclosures about executive compensation performance 
measures complicated or difficult to analyze? If so, how could we make 
these disclosures less complicated or facilitate their analysis while 
also meeting the requirements of Section 953(a) of the Dodd-Frank Act?
    14. To what extent would the ability of registrants to voluntarily 
supplement the disclosure required by the proposed rules obviate the 
need for additional mandated elements of disclosure considered in this 
re-opening release? Should we rely on investor demand and individual 
registrant circumstances to drive any additional disclosures? Would 
such voluntary disclosures be more useful than the additional 
contemplated disclosures? Would such disclosures lack comparability or 
be overly subjective relative to the additional contemplated 
disclosures?
    15. As noted above, based on staff analysis of filings in 2019, 
approximately 45 percent of registrants subject to the proposed rules 
would be SRCs, compared to approximately 40 percent at the time of 
publication of the proposed rules.\24\ In light of this, should we 
reconsider the scaled requirements for SRCs in the proposed rules and/
or the additional measures we are considering?
---------------------------------------------------------------------------

    \24\ See supra footnote 5.
---------------------------------------------------------------------------

    16. For SRCs, would disclosure of either pre-tax net income or net 
income be useful to investors when placed alongside the metrics 
included in the Proposing Release? Are there different measures of 
financial performance that would be more appropriate for SRCs? Should 
we require SRCs to disclose a Company-Selected Measure and the list of 
their five most important performance measures used to set NEO 
compensation? Why or why not? What would be the burdens on SRCs of 
providing this additional disclosure and would the benefits of 
requiring this disclosure for SRCs justify the burdens? Would any such 
burdens be mitigated by the fact that the Company-Selected Measure and 
the list of a company's five most important performance measures are by 
definition measures that the company already uses to link compensation 
actually paid to financial performance? Is there relevant data on the 
long-term costs from diminished transparency that we should consider in 
this regard?
    17. The Commission proposed to require that registrants use XBRL to 
tag separately the values disclosed in the required table, and 
separately block-text tag the disclosure of the relationship among the 
measures, the footnote disclosure of deductions and additions used to 
determine executive compensation actually paid, and the footnote 
disclosure regarding vesting date valuation assumptions. We are 
considering requiring registrants to also tag specific data points 
(such as quantitative amounts) within the footnote disclosures that 
would be block-text tagged. In addition, we are considering requiring 
registrants to use Inline XBRL rather than XBRL to tag their pay versus 
performance disclosure.\25\ Would additional detail tagging of some or 
all of those specific data points within the footnote disclosures be 
valuable to investors? If so, which specific data points within the 
footnote disclosures should we require registrants to detail tag and

[[Page 5758]]

why? What would be the incremental costs of such a requirement? Should 
we require registrants to use Inline XBRL rather than XBRL to tag the 
proposed new pay versus performance disclosures? Is there an 
alternative machine-readable language to Inline XBRL that we should 
consider? Should we enable more flexibility by accommodating other 
machine-readable languages? If we were to require Inline XBRL detail 
tagging of the disclosures, should we exempt smaller reporting 
companies from that requirement? \26\ Would the costs be different for 
smaller reporting companies to comply with such a requirement as 
compared to other registrants? Should we, as was proposed with respect 
to the original XBRL tagging requirement, provide a phase-in for 
smaller reporting companies for any Inline XBRL requirement that 
includes additional detail tagging?
---------------------------------------------------------------------------

    \25\ Subsequent to the proposal, the Commission adopted rules 
replacing XBRL tagging requirements for registrant financial 
statements with Inline XBRL tagging requirements. Inline XBRL embeds 
the machine-readable tags in the human-readable document itself, 
rather than in a separate exhibit. See Inline XBRL Filing of Tagged 
Data, Release No. 33-10514 (June 28, 2018) [83 FR 40846 (Aug. 16, 
2018)]. The Commission also has subsequently adopted rules requiring 
structured data reporting using Inline XBRL format for certain 
business development company disclosures. See Securities Offering 
Reform for Closed-End Investment Companies, Release No. IC-33836 
(Apr. 8, 2020) [85 FR 33290 (June 1, 2020)]. As a result of those 
changes, we are considering using Inline XBRL, rather than XBRL, for 
the proposed tagging requirements.
    \26\ Smaller reporting companies are currently subject to the 
Commission's Inline XBRL tagging requirements, including detail 
tagging requirements.
---------------------------------------------------------------------------

    18. Some commenters to the Proposing Release noted that the 
definition of compensation actually paid may result in some 
misalignment between the time period to which pay is attributed and the 
time period in which the associated performance is reported, but they 
generally disagreed on whether and how to revise the definition to 
improve such alignment.\27\ Is there an alternative approach that would 
reduce the risk of misalignment of compensation actually paid with the 
associated financial performance and still provide for appropriate 
comparability across registrants, including the additional measures of 
financial performance discussed above? Would the inclusion of 
additional measures of financial performance as contemplated above 
affect this potential mismatch?
---------------------------------------------------------------------------

    \27\ See, e.g., letters from Allison Transmission Holdings, Inc. 
dated July 6, 2015, Celanese Corp. dated June 12, 2015, Center On 
Executive Compensation dated July 6, 2015, Frederick W. Cook & Co., 
Inc. dated June 24, 2015, Corporate Governance Coalition for 
Investor Value dated July 23, 2015, Farient Advisors dated July 6, 
2015, Jon Faulkner dated May 4, 2015, Financial Services Roundtable 
dated July 6, 2015, Honeywell International Inc. dated July 2, 2015, 
NACCO Industries, Inc. dated June 9, 2015, National Association of 
Corporate Directors dated July 10, 2015, National Association of 
Manufacturers dated July 6, 2015, Pearl Meyer & Partners dated July 
6, 2015, Ross Stores, Inc. dated June 26, 2015, Shareholder Value 
Advisors Inc. dated July 6, 2015, State Board of Administration of 
Florida dated July 6, 2015, Teachers Insurance Annuity Association 
of America dated July 6, 2015, Technical Compensation Advisors, Inc. 
dated July 6, 2015, and WorldatWork dated July 6, 2015.
---------------------------------------------------------------------------

    19. Some commenters to the Proposing Release noted potential 
challenges with using the pension service cost as defined in FASB ASC 
Topic 715 to determine the amount attributable to pension plans to be 
included in compensation actually paid.\28\ As discussed in the 
Proposing Release, the service cost for services rendered by the 
executive in the applicable year is meant to approximate the value that 
would be set aside currently by the registrant to fund the pension 
benefits payable upon retirement for the service provided during the 
applicable year, and is intended to provide a more meaningful 
comparison across registrants of the amounts ``actually paid'' under 
both defined benefit and defined contribution plans. Is there an 
alternative measure of the change in pension value attributable to the 
applicable fiscal year that is better representative of the ``actually 
paid'' amount of pension benefits for an executive and would reduce the 
burden of computing compensation actually paid while preserving the 
benefits of the measure for investors? If so, describe how that amount 
would be calculated and what assumptions or new or additional data 
would be necessary for such calculation.
---------------------------------------------------------------------------

    \28\ See, e.g., letters from AON Hewitt dated July 6, 2015, 
Exxon Mobil Corp. dated June 23, 2015, Towers Watson dated July 6, 
2015, and WorldatWork dated July 6, 2015.
---------------------------------------------------------------------------

    20. Some commenters to the Proposing Release noted potential 
challenges associated with computing the fair value of options at the 
vesting date as opposed to the grant date.\29\ Are there 
simplifications or other adjustments that we could permit for this 
purpose in order to mitigate such challenges? How, if at all, would any 
such simplifications or adjustments affect the cost of producing the 
disclosure and the usefulness of the disclosure? For example, are there 
certain assumptions used in the valuation of options that we should 
allow to be carried forward from the grant date rather than re-computed 
as of the vesting date? What is the likelihood that assumptions would 
vary significantly between grant date and vesting date? To what extent 
could any new assumptions required for a valuation as of the vesting 
date be determined based on computations that would be made for another 
purpose, such as the valuation of new grants made around the same time?
---------------------------------------------------------------------------

    \29\ See, e.g., letters from Celanese Corp. dated June 12, 2015, 
Center for Capital Markets Competitiveness dated June 30, 2015, 
Frederick W. Cook & Co., Inc. dated June 24, 2015, and National 
Association of Corporate Directors dated July 10, 2015. But see 
letters from American Federation of Labor and Congress of Industrial 
Organizations dated June 30, 2015, Council of Institutional 
Investors dated June 25, 2015, Honeywell International Inc. dated 
July 2, 2015, and Teachers Insurance Annuity Association of America 
dated July 6, 2015.
---------------------------------------------------------------------------

    21. Some commenters to the Proposing Release had questions about 
which time periods should be disclosed in the TSR portions of the 
table.\30\ Should we clarify what time periods should be disclosed? For 
example, should we require TSR to be a five-year cumulative and rolling 
average (i.e., the TSR for the first year would be the average TSR over 
the five years preceding and including the first year, the TSR for the 
second year would be the average TSR over the five years preceding and 
including the second year, etc.); \31\ should we require TSR to be a 
cumulative average within the five-year period in the table (i.e., the 
TSR for the first year would be an average of the TSR over that first 
year, the TSR for the second year would be an average of the TSR over 
the first year and the second year, etc.); \32\ or should we require 
TSR to be an annual year-over-year figure (i.e., the TSR for the first 
year would be the average TSR over the first year, the TSR for the 
second year would be the average TSR for the second year, etc.)? \33\ 
What would the benefits and drawbacks be of each of these approaches?
---------------------------------------------------------------------------

    \30\ See letters from Center On Executive Compensation dated 
July 6, 2015, Frederick W. Cook & Co., Inc. dated June 24, 2015, 
Steven Hall & Partners dated July 6, 2015, Honeywell International 
Inc. dated July 2, 2015, Mercer LLC dated July 6, 2015, Pearl Meyer 
& Partners dated July 6, 2015, and Technical Compensation Advisors, 
Inc. dated July 6, 2015.
    \31\ See, e.g., letter from Honeywell International Inc. dated 
July 2, 2015.
    \32\ See, e.g., letter from Pearl Meyer & Partners dated July 6, 
2015.
    \33\ See, e.g., letters from Pearl Meyer & Partners dated July 
6, 2015, and Technical Compensation Advisors, Inc. dated July 6, 
2015.
---------------------------------------------------------------------------

    22. Are there any other developments (including with respect to 
executive compensation practices) since the Proposing Release that 
should affect our consideration of the proposed rules or their 
potential economic effects? How have qualitative measures in executive 
compensation packages changed and/or developed since the Proposing 
Release? How should we contemplate such changes in our consideration of 
the disclosures discussed above and in the Proposing Release? How have 
environmental, social and governance related metrics changed and/or 
developed since the Proposing Release? How should we contemplate such 
changes in our consideration of the disclosures discussed above and in 
the Proposing Release? Are there changes in market practices with 
respect to disclosures in the CD&A or voluntary

[[Page 5759]]

disclosures that should affect our approach or affect our consideration 
of the economic effects of any rule changes? Are there any changes we 
should consider in the methodologies and estimates used to analyze the 
economic effects of the proposed rules in the Proposing Release?
    We request and encourage any interested person to submit comments 
regarding the Proposed Rules, specific issues discussed in this release 
or the Proposing Release, and other matters that may have an effect on 
the proposed rules or the additional disclosure requirements we have 
noted here that we are considering. We request comment from the point 
of view of registrants, shareholders, directors, executives, investors, 
other market participants, and anyone else with an interest in this 
issue. If alternatives to the Proposed Rules are suggested, supporting 
data and analysis and quantitative information as to the costs and 
benefits of those alternatives are of particular assistance. Commenters 
are urged to be as specific as possible; when commenting, it would be 
most helpful if you include the reasoning behind your position or 
recommendation.
    If any commenters who have already submitted a comment letter wish 
to provide supplemental or updated comments, we encourage them to do 
so.

    By the Commission.

    Dated: January 27, 2022.
Vanessa A. Countryman,
Secretary.
[FR Doc. 2022-02024 Filed 2-1-22; 8:45 am]
BILLING CODE 8011-01-P