Year 1 of filings related to the SEC’s Pay versus Performance disclosure is largely completed and it is already time to begin planning for Year 2. For most companies the biggest pain point is calculating “Compensation Actually Paid”, as the amount of data is significant.
Luckily, the Year 2 process will be much easier, since only 1 additional year of Compensation Actually Paid is required. Infinite Equity has compiled a comprehensive data request for Year 2 PvP compliance.
| Data Item | Description |
|---|---|
| PEO and other NEO’s for Years | A summary of the known NEOs for the upcoming Proxy disclosures (and any potential NEOs) |
| Summary Compensation Table (SCT) for Current Fiscal Year | If the Summary Compensation Table numbers are still being finalized, preliminary estimates of the SCT |
| Equity Administration Period Report | Generally, an export from your equity administration system. This will be a report of all equity activity during the period starting with a beginning of year balance, including any vesting, or forfeiture events. The report should be summarized by vesting tranche. Depending on the equity administration, this report has different names or approaches. |
| Beginning of Year Fair Value by Vesting Tranche (“BOY-FVVT”) | Compensation Actually Paid is calculated as the difference between the End of Year Fair Value by Vesting Tranche (EOY-FVVT) minus the Beginning of Year Fair Value by Vesting Tranche (BOY – FVVT). But the basis for developing CAP accruals will be the EOY-FVVT from the prior year (or this year’s BOY-FVVT). Companies should ensure that this data field is in their records. If your company does not currently have this, you should request this data from your service provider. |
| Award Agreements for Outstanding Market Based Equity Awards | Award agreements for outstanding market-based awards (which would generally require Monte Carlo simulation). If a service provider was used to value Market Based Equity Awards, copies of the grant date valuation reports for outstanding awards would be required as well. |
| Current ASC718 Valuation Methodologies | An accounting memo of ASC718 valuation methodologies, or an ASC718 valuation report will suffice. |
| Performance Assessment for Outstanding Performance-Based Equity as of Year End | Generally, the same assessment that is applied for ASC718 expense accrual purposes. |
| Changes in Pension Value and Non-Tax qualified Deferred Comp | Change in the actuarial present value of any defined benefit pension plans disclosed in the Summary Compensation table, any actuarial service cost associated with the plan, any above-market earnings on non-tax qualified deferred compensation. |
Are you ready for Year 2?
Infinite Equity continues to help companies with their Pay Versus Performance disclosure as well as how the disclosure will impact both the executive and equity compensation community. For more information on the pay for performance regulations or assistance navigating the rules, reach out to us at Infinite Equity for help, or learn more at www.SECPayVersusPerformance.com.
Five Practical Improvements for Modernizing Executive Compensation Disclosure
Reframing Compensation Actually Paid, TSRs, and the CEO Pay Ratio into the SCT
