SEC Proposes Major Overhaul of Executive Compensation Disclosure Rules to Enhance Clarity and Reduce Compliance Burdens

Statement Summary

The SEC has proposed amendments to the executive compensation disclosure requirements under Item 402 of Regulation S-K, marking the first comprehensive review in over twenty years. Aimed at enhancing clarity and materiality, the revisions will streamline disclosures to focus on information pivotal for investors while reducing compliance burdens for companies. The proposal stems from extensive input from stakeholders and aims to ensure that disclosures reflect the reasonable investor's needs rather than niche interests. Key changes involve clearer tabular formats for common compensation elements and aligning with mandated disclosures like golden parachutes and pay ratios. This initiative represents a crucial step in the SEC's ongoing efforts to modernize public company disclosures.

Original Statement

Today, the Commission proposed amendments to its executive compensation disclosure requirements contained in Item 402 of Regulation S-K. These amendments reflect a comprehensive reform of Item 402 that, together with other previously proposed actions, are central tenets of my agenda and focus on transforming the SEC’s public company disclosure regime to one rooted in materiality.

During each of my prior two tours of duty at the agency, the Commission amended Item 402. First, in 1992 when I served as Chief of Staff to Chairman Richard C. Breeden, and then again in 2006 when I served as a Commissioner. These prior amendments reflected a recognition that the Commission’s rules for executive compensation disclosure require periodic updating to reflect developments in how companies compensate executives and how investors use compensation information to make investment and voting decisions.

Unfortunately, the last time the Commission comprehensively reviewed Item 402 was twenty years ago with the 2006 amendments. Since then, the rule has become bloated—reaching nearly the end of the alphabet in its internal organizational system—through the addition of both congressionally-mandated requirements and discretionary rulemaking for nuanced issues. Not surprisingly, this accumulation over the past twenty years without a comprehensive retrospective review has resulted in a disclosure regime that no longer clearly informs investors of material aspects of companies’ executive compensation decisions.

With the benefit of input from more than 80 comment letters received from investors, companies, and advisors in connection with the SEC’s roundtable on executive compensation in July 2025, today’s proposal aims to elicit more informative disclosure rooted in materiality. As the Supreme Court has stated, materiality is an objective standard based on the reasonable investor. The standard does not look to capture information that a particular investor is curious to know or would like to have as a datapoint, especially if there is not a substantial likelihood that the datapoint significantly alters the total mix of information for an investment or voting decision.

As applied to executive compensation disclosure, a panelist at last year’s roundtable aptly analogized current Item 402 to an ice cream parlor that carries rum raisin and maple walnut; flavors desired by only a single customer.

The proposed amendments would, if adopted, revise Item 402 to focus on an objective standard regarding needs of the reasonable investor, rather than on the specialized tastes of a specific investor. Furthermore, the proposal would amend Item 402 to elicit information that clearly informs investors of when compensation is first granted and then ultimately earned, through tabular disclosure focused on the most common elements of compensation—salary, bonus, and equity. At the same time, amended Item 402’s principles-based and materiality-centric approach would reduce costs to companies and provide them with more agency when crafting compensation disclosure.

Of course, Item 402 includes disclosure mandated by Congress, such as the Dodd-Frank Act’s requirements for golden parachutes, pay versus performance, pay ratio, and clawbacks. With respect to these rules, today’s amendments aim to reduce compliance burdens for companies while remaining faithful to the congressional mandate. This approach reflects my regulatory philosophy of prescribing the minimum effective dose of regulation.

In the context of my overall policy agenda, today’s proposal represents the second of three pillars aimed at transforming the Commission’s public company disclosure regime. This past May, the Commission proposed amendments that would, if adopted, create two categories of public companies, with appropriately calibrated disclosure for each category. Today’s proposal signifies the beginning of the next phase of transformation—revising the specific disclosure requirements themselves, starting with the executive compensation portion of Regulation S-K. Looking ahead, Commission staff is making great strides toward recommendations for the final stage of the transformation, which is to reform the business, risk, and governance requirements of Regulation S-K.

I look forward to receiving and reviewing the public’s feedback on today’s proposal. Thank you to the following members of the Commission staff for their innovative ideas for, and dedication to, this consequential proposal.

Division of Corporation Finance: Jim Moloney, Sebastian Gomez Abero, Christina Thomas, Luna Bloom, Valian Afshar, Steven Hearne, Amanda Ravitz, Dennis Hermreck, Joshua Gorsky, Jessica Ansart, Dillon Hagius, Doris Stacey Gama, Michael Seaman, Lisa McCann, Jenny Choi, Melissa Raminpour, Diane Marciano, Ethan Horowitz, Jessica Barberich, Tiffany Posil, Michael Coco, Robert Errett, and Todd Canali.

Division of Investment Management: Brian Johnson, Pamela Ellis, and Angela Mokodean.

Division of Economic and Risk Analysis: Joshua White, Oliver Richard, Amy Edwards, Tara Bhandari, Mahdi Mohseni, Lyndon Orton, Lauren Moore, Charles Woodworth, Samantha Croffie, Matthew Pacino, Julie Marlowe, Paul Yin, and Michael Pessin.

Office of the General Counsel: J. Russell McGranahan, Bryant Morris, Dorothy McCuaig, David Russo, Cynthia Bien, Brooks Shirey, and Rebecca Orban.

Office of the Chief Accountant: Kurt Hohl, Shehzad Niazi, Patrick Foley, Sheri York, Gaurav Hiranandani, Greg Hillson, Ginni Fritz, and Sarah Esquivel.