The Securities and Exchange Commission on Friday proposed rule amendments to make executive and director compensation disclosures more principles-based and driven by materiality, the agency said. The SEC said the changes are intended to give investors clearer, more concise, and less complex information.
According to the SEC, the proposal would refocus disclosures, last comprehensively reformed in 2006, on material information and improve investors’ ability to track equity awards through their lifecycle. The agency said the amendments aim to reduce compliance burdens where there is not a commensurate benefit for investors and to allow more flexibility in how registrants present information.
“Today, the Commission proposed amendments to its executive compensation disclosure requirements contained in Item 402 of Regulation S-K,” SEC Chairman Paul S. Atkins said in a statement. He said the proposal reflects input from more than 80 comment letters received in connection with the SEC’s July 2025 roundtable on executive compensation and aims to “elicit more informative disclosure rooted in materiality.”
Under the proposal, the group of named executive officers would encompass the principal executive officer and principal financial officer, which the SEC said would reduce the number of named executives from typically five or more to two in most circumstances. The SEC also proposed replacing the primary four executive compensation tables with three new tables—the Earned Compensation Table, the Granted Compensation Table, and the Status of Equity Awards Table—with accompanying narratives, to retain material information while streamlining and clarifying the presentation.
The SEC proposed to raise the minimum aggregate reporting threshold for perquisites from $10,000 to $150,000 and to introduce a new de minimis tracking exclusion. The proposal would also revise the Commission’s interpretive guidance regarding perquisites to give registrants more flexibility to determine whether a benefit is a perquisite, so long as the determination is reasonable and made in good faith, the release said.
The Compensation Discussion and Analysis requirement would become more principles-based, require registrants to address only three topics, and eliminate the current list of 15 example topics. For pay-versus-performance disclosures, the SEC proposed reducing required performance measures and replacing the “Compensation Actually Paid” calculation with the total compensation earned amount from the proposed Earned Compensation Table. The SEC said these changes would continue to satisfy the Dodd-Frank Act’s statutory mandate while simplifying disclosure requirements.
The proposal would limit the population used to determine the “median employee” under the pay ratio rule to U.S. full-time employees and reduce the required frequency of that determination to every five years. It would also eliminate required check boxes from the cover pages of annual reports and certain potentially redundant disclosures regarding the application of a registrant’s clawback policy, which the SEC said overly burden registrants without eliciting material information for investors. The SEC said the underlying mechanics of a registrant’s clawback process would remain unchanged.
The public comment period will remain open for 60 days following publication of the proposing release in the Federal Register, the SEC said.