March 15, 2023


SEC Issues 15 CDI’s on Pay Versus Performance Disclosure




Margaret Engel
Founding Partner [email protected] 212-921-9353
Kyle White
Associate [email protected] 845-418-9535


On February 10, 2023, the SEC's Division of Corporation Finance issued 15 Compliance & Disclosure Interpretations (“CDI’s”) addressing common question in regards to the new Pay Versus Performance disclosure rules (Item 402(v)), which were adopted last August. This Alert provides a summary of each CDI.

1. PVP Disclosure in Form 10-K (128D.01)

Information required pursuant to the Pay Versus Performance (“PVP”) disclosure rules are not required for Form 10-K’s, except to the extent the registrant specifically incorporates it by reference.

2. Change in Fair Value Awards for First-Time NEO’s (128D.02)

For the Compensation Actually Paid (“CAP”) calculation, companies must include the change in fair value of awards granted to a first-time NEO for all years during an executive’s tenure as an NEO, no matter if such awards were granted before the executive became an NEO or not. Therefore, if an executive is was a first-time NEO in 2022, but was granted equity awards as an employee in 2020 and 2021, CAP must include the change in fair value of such awards granted in 2020 and 2021.

3. Footnote Disclosure for Prior Years (128D.03)

For years other than the current fiscal year, footnote disclosure for each of the amounts added and deducted to calculate CAP are required only if it is material to an investors’ understanding for the current fiscal year.

4. Footnote Disclosure Detail (128D.04)

The registrant should provide footnote disclosure for each of the amounts added and deducted to calculate CAP, not aggregate amounts.

5. Peer Group TSR Calculation (128D.05)

For the peer group cumulative total shareholder return (“TSR”) calculation, a registrant may use a peer group disclosed in the CD&A even if the peer group is not used for “benchmarking” purposes.

6. Date Used for TSR Calculation for Newly Public Companies (128D.06)

If a company went public during the earliest year included in the PVP table, the ‘measurement point’ (or start date) used for the registrant company and peer group cumulative TSR calculation should begin on its registration date.

7. Peer Group Change Effect on TSR Calculation (128D.07)

Companies must present peer group TSR for each year in the PVP table using the peer group disclosed in the CD&A for such year, even if it has changed in each of the years presented.

8. Type of Net Income Metric Used (128D.08)

Companies must include GAAP Net Income (Loss) in the PVP table, not an adjusted figure.

9. CSM Selection (128D.09)

The Company-Selected Measure (“CSM”) used in the PVP table can be any financial performance metric that differs from required financial performance metrics, even if it is derived from, a component of, or similar to such required metrics.

10. Stock Price as CSM (128D.10)

Companies can only use Stock Price as its CSM if it is a market condition applicable to an incentive plan award or used to determine the size of an incentive pool.

11. CSM Performance Period (128D.11)

The CSM cannot be a multi-year measure.

12. Financial Measures in Incentive Plan Pools (128D.12)

For incentive plan pools, the registrant must include the financial measure(s) in the Tabular List required under the PVP disclosure rules that determine the payout or the size of the pool, even if individual allocation of such pools are made discretionarily.

13. Aggregation of PEO Compensation Under PVP Disclosure Rules (128D.13)

In the PVP table, if there are multiple Principal Executive Officers ("PEO's") in a given year, they must be separated into different columns. However, a company may aggregate PEO compensation for purposes of the narrative, graphical, or combined comparison between CAP, TSR, GAAP Net Income (Loss), and the CSM, to the extent that it is not misleading to investors.

14. Changes in Fiscal Year Under PVP Disclosure Rules (228D.01)

If a company changes its fiscal year during the time period covered under the PVP table, instead of annualizing or restating compensation, the registrant should provide disclosure for the “stub period” – consistent with the approach applicable to Summary Compensation Table disclosure under the same scenario.

15. Post-Bankruptcy TSR Calculation (228D.02)

If a company emerged from bankruptcy and issued a new class of stock under the bankruptcy plan, registrant company and peer group cumulative TSR may be disclosed using a measurement period beginning when the post-bankruptcy class of stock began trading.