Federal Register / Vol. 87, No. 22 / Wednesday, February 2, 2022 / Proposed Rules 5751 

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

2See 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.’’ 

4A ‘‘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. 

5The 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. 

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 

• Use the Commission’s internet 

comment form (https://www.sec.gov/ 

rules/submitcomments.htm). 

Paper Comments 

• 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. 

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


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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). 

7 17 CFR 229.402(c). SRCs would provide the 

scaled Summary Compensation Table disclosure in 

17 CFR 229.402(n). 

8As 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. 

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. 

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-versusperformance 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. 

11For example, there has been a continued 

increase in the prevalence of performancecontingent 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-ceocompensation-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/ceoexecutive-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/ 

Year 

Summary 

compensation 

table total 

for PEO 

Compensation actually 

paid to PEO 

Average 

summary 

compensation 

table total for non-PEO 

NEO 

Average 

compensation 

actually paid 

to non-PEO 

NEO 

Total 

shareholder 

return 

Peer group total 

shareholder 

return * 

(a) (b) (c) (d) (e) (f) (g) 

Y1 ................ ..................................... ..................................... ..................................... ..................................... .....................................

Y2 ................ ..................................... ..................................... ..................................... ..................................... .....................................

Y3 ................ ..................................... ..................................... ..................................... ..................................... .....................................

Y4 * ................ ..................................... ..................................... ..................................... ..................................... .....................................

Y5 * ................ ..................................... ..................................... ..................................... ..................................... .....................................

Specifically, the proposed rules 

would: 

• Apply to a registrant’s ‘‘named

executive officers’’ (‘‘NEOs’’) as defined 

in 17 CFR 229.402(a)(3); 6

• 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): 

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 

2. Include the value of equity awards

at vesting rather than when granted. 

• Require the executive compensation

amounts actually paid to be presented 

separately for the PEO, and as an 

average for the remaining NEOs; 

• 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); 

• 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; 

• 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 

• Require that the disclosure be

provided in a structured data language 

using the Inline eXtensible Business 

Reporting Language (‘‘Inline XBRL’’).9

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

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 


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Meridian-2020-Trends-and-Developments-SurveyFinal.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). 

12Net 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 pretax net income. 

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. 

14See, 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. 

15The title of column (j) of the table, ‘‘CompanySelected 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. 

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. 

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: 

• Consistently calculated and should 

increase comparability across 

registrants; 

• Objectively determinable and not 

open to subjective determinations of 

performance; and 

• 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 ‘‘CompanySelected 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 marketbased 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. 

We are also considering whether to 

require registrants to disclose, as an 

additional column to the above table, a 

third new measure—the CompanySelected 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. 

For reference, the three additional 

measures we are considering requiring 

would be part of the table in the 

proposed rules as follows: 15


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16Throughout 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. 

17See, 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. 

18See 17 CFR 229.402(b)(1). 

19These specific examples are set forth in 17 CFR 

229.402(b)(2)(v) through (vii). 

Year 

Summary 

compensation 

table total for 

PEO 

Compensation 

actually paid 

to PEO 

Average 

summary 

compensation 

table total for 

non-PEO 

NEOs 

Average 

compensation 

actually paid 

to non-PEO 

NEOs 

Total 

shareholder 

return 

Peer group 

total 

shareholder 

return * 

Pre-tax net 

income (loss) 

Net income 

(loss) 

[Companyselected 

measure] * 

(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: 

• What specific items of corporate 

performance are taken into account in 

setting compensation policies and 

making compensation decisions; 

• How specific forms of 

compensation are structured and 

implemented to reflect these items of 

corporate performance; and 

• 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

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 CompanySelected 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 


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Federal Register / Vol. 87, No. 22 / Wednesday, February 2, 2022 / Proposed Rules 5755 

20See 17 CFR 229.402(l) through (r). 

21See Instructions to Item 201(e) of Regulation S– 

K. 

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 CompanySelected 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

With respect to the potential 

disclosure of additional measures, pretax 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 CompanySelected Measure as the measure that in 


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5756 Federal Register / Vol. 87, No. 22 / Wednesday, February 2, 2022 / Proposed Rules 

22See 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). 

23See 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. 

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 CompanySelected 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 CompanySelected 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)? 

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 CompanySelected 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 CompanySelected 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 CompanySelected 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 


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Federal Register / Vol. 87, No. 22 / Wednesday, February 2, 2022 / Proposed Rules 5757 

24See supra footnote 5. 

25Subsequent 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. 

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 CompanySelected 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? 

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 


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5758 Federal Register / Vol. 87, No. 22 / Wednesday, February 2, 2022 / Proposed Rules 

26Smaller reporting companies are currently 

subject to the Commission’s Inline XBRL tagging 

requirements, including detail tagging 

requirements. 27See, 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. 

28See, 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. 29See, 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. 

30See 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. 

31See, e.g., letter from Honeywell International 

Inc. dated July 2, 2015. 

32See, e.g., letter from Pearl Meyer & Partners 

dated July 6, 2015. 

33See, e.g., letters from Pearl Meyer & Partners 

dated July 6, 2015, and Technical Compensation 

Advisors, Inc. dated July 6, 2015. 

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? 

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? 

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. 

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? 

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 fiveyear 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? 

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 


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Federal Register / Vol. 87, No. 22 / Wednesday, February 2, 2022 / Proposed Rules 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 

DEPARTMENT OF STATE 

22 CFR Parts 120, 126, and 127 

[Public Notice: 11532] 

RIN 1400–AF39 

International Traffic in Arms 

Regulations: Corrections and 

Clarifications for Export and Reexport; 

Canadian Exemptions; Exemptions 

Regarding Intra-Company, IntraOrganization, and Intra-Governmental 

Transfers to Employees Who Are Dual 

Nationals or Third-Country Nationals; 

and Voluntary Disclosures 

AGENCY: Department of State. 

ACTION: Proposed rule. 

SUMMARY: The Department of State 

(DOS) proposes to amend the 

International Traffic in Arms 

Regulations (ITAR) to clarify the 

definitions of export and reexport. 

Further, the Department proposes to 

replace the term ‘‘national’’ with 

‘‘person’’ in the Canadian exemptions; 

revise the exemption for intra-company, 

intra-organization, and intragovernmental transfers to dual nationals 

or third-country nationals; and correct 

administrative errors in the section on 

voluntary disclosures. 

DATES: The Department of State will 

accept comments on this proposed rule 

until April 4, 2022. 

ADDRESSES: Interested parties may 

submit comments by one of the 

following methods: 

• Email: DDTCPublicComments@

state.gov with the subject line: 

‘‘Regulatory Change: ITAR Sections 120, 

126 and 127’’ 

• Internet: At www.regulations.gov, 

search for this notice, Docket DOS– 

2021–0031. Comments received after 

that date may be considered if feasible, 

but consideration cannot be assured. 

Those submitting comments should not 

include any personally identifying 

information they do not desire to be 

made public or information for which a 

claim of confidentiality is asserted, 

because comments and/or transmittal 

emails will be made available for public 

inspection and copying after the close of 

the comment period via the Directorate 

of Defense Trade Controls website at 

www.pmddtc.state.gov. Parties who 

wish to comment anonymously may do 

so by submitting their comments via 

www.regulations.gov, leaving the fields 

that would identify the commenter 

blank and including no identifying 

information in the comment itself. 

FOR FURTHER INFORMATION CONTACT: Ms. 

Engda Wubneh, Foreign Affairs Officer, 

Office of Defense Trade Controls Policy, 

U.S. Department of State, telephone 

(202) 663–1809; email 

DDTCCustomerService@state.gov. 

ATTN: Regulatory Change, ITAR parts 

120, 126, and 127. 

SUPPLEMENTARY INFORMATION: The 

Department of State proposes to amend 

the International Traffic in Arms 

Regulations (ITAR) to revise the 

definitions of export (ITAR § 120.17) 

and reexport (ITAR § 120.19) to clarify 

that any release of technical data to a 

foreign person described within the 

respective definitions is a release only 

to any countries in which that foreign 

person currently holds citizenship or 

permanent residency. Since the 

Department published ‘‘International 

Traffic in Arms Regulations: Revisions 

to Definition of Export and Related 

Definitions’’ (81 FR 35611) in 2016, the 

Department has changed its assessment 

that inclusion of prior citizenship or 

permanent residency in ITAR 

§§ 120.17(b) and 120.19(b) is necessary 

based on its experience with this 

provision. The Department assesses that 

a foreign person’s former citizenship or 

permanent residency status in a country 

should not be deemed to automatically 

result in an export or reexport to that 

country. The Department proposes this 

change to better align with our policy 

and requirements in Section 126.18 and 

to provide greater opportunities for 

foreign persons who are no longer 

citizens or permanent residents of 

certain countries to participate in ITARregulated activities. 

Further, the Department proposes to 

replace the term ‘‘national’’ with the 

ITAR-defined term ‘‘person’’ in ITAR 

§ 126.5(b) of the Canadian exemption to 

be consistent with how foreign persons 

are defined in the ITAR. The 

Department also proposes to remove the 

phrase ‘‘although nationality does not, 

in and of itself, prohibit access to 

defense articles’’ from ITAR 

§ 126.18(c)(2) as the definitions of 

export and reexport provide that a 

release to a foreign person constitutes an 

export or reexport, as applicable, to all 

countries in which the foreign person 

holds citizenship or permanent 

residency. This proposed change is not 

intended to convey any change to the 

Department’s long-standing position 

that the purpose of vetting employees 

from countries listed in ITAR § 126.1 is 

to mitigate diversion. Further, simply 

identifying nationalities with no 

substantive contacts with ITAR § 126.1 

countries is not a precondition to rely 

on to use the exemption for intracompany, intra-organization, and intragovernmental transfers to dual or thirdcountry nationals. The Department also 

proposes to clarify ITAR § 126.18(c)(2) 

by stating that the screened employee, 

not the end-user or consignee, must 

execute a nondisclosure agreement to 

provide assurances that said employee 

will not transfer any unclassified 

defense articles to unauthorized 

persons. 

Lastly, the Department proposes to 

correct administrative errors in the 

voluntary disclosures section of the 

ITAR by providing the correct 

references to exemptions pursuant to 

the Defense Trade Cooperation Treaties 

between the United States and Australia 

and the United States and the United 

Kingdom in ITAR §§ 126.16 and 126.17, 

respectively. Additionally, the 

Department proposes to streamline the 

section on voluntary disclosures by 

simply referencing the relevant ITAR 

sections, §§ 126.1(e), 126.16(h)(8), and 

126.17(h)(8), that describe the duties of 

persons to notify the Directorate of 


jspears on DSK121TN23PROD with PROPOSALS1