March 16, 2023

More PVP Observations

The early observations about pay versus performance disclosure have been rolling in, which are providing a useful overview of the trends for those filers who are still working on their disclosures. In this blog post from equitymethods, the observations are based on 36 companies that have provided the disclosure as of March 3, 2023. These tended to be larger filers with a majority having over $1 billion in market capitalization. The blog post notes the top five areas of risk gleaned from the sample:

1. Failing to provide Item 402(v)(5) relationship disclosures altogether
2. Omitting one of the required Item 402(v)(5) relationship disclosures (such as the company TSR to peer TSR comparison)
3. Adding supplemental disclosure that violates the requirement that any supplemental disclosure be clearly labeled as supplemental, not be made more prominent than the required disclosure, and not be misleading
4. Including a non-financial measure in the Tabular List prior to providing three financial measures (e.g., there are two financial measures and one non-financial measure)
5. Using an Item 201(e) peer group that is a broad market index and therefore falls within Item 201(e)(1)(i) but not the requirement that it fall within Item 201(e)(1)(ii), which excludes any broad market index

The blog post also notes that some filers omitted the granular equity calculations required and many filers did not provide much disclosure about assumptions.

– Dave Lynn