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Proposition de la SEC eu égard à la divulgation de la rémunération de la direction en rapport avec la performance organisationnelle

10 mai 2015

Les actionnaires doivent obtenir toute l’information pertinente pour leur permettre d’évaluer l’efficacité de leurs hauts dirigeants et leur permettre de voter en ayant accès aux meilleures informations possibles. C’est la raison pour laquelle la Securities and Exchange Commission (SEC) propose un amendement règlementaire relatif à la rémunération des hauts dirigeants, en rapport avec la performance.

Il est ainsi proposé que la SEC adopte un renforcement des règles de divulgation dans les circulaires de procuration en publiant une table qui révèle la rémunération de la haute direction en relation avec la performance financière de l’entreprise au cours des cinq dernières années.

La divulgation de ces données, sous une forme standardisée, facilitera les comparaisons avec d’autres entreprises cotées du même secteur d’activité.

Le résultat de cette consultation sera déterminante dans les décisions des autorités règlementaires canadiennes.

Le court article ci-dessous est basé sur les vues exprimées par *, commissaire de la  U.S. Securities and Exchange. J’ai enlevé les notes de bas de page afin d’alléger le billet mais vous pouvez retrouver l’intégralité de ses propos dans l’article Proposed Rule on Pay Versus Performance, publié dans le Harvard Law School of Corporate Governance.

Executive compensation and its relationship to the performance of a company has been an important issue since the first proxy rules were promulgated by the Commission nearly 80 years ago. The first tabular disclosure of executive compensation appeared in 1943, and over the years, the Commission has continued to update and overhaul the presentation and content of compensation disclosures.

CEO Pay – Humongous

Today [April 29, 2015], the Commission, as directed by Congress, takes another important step in modernizing our executive compensation rules by proposing amendments on pay versus performance. Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act directed the Commission to adopt rules requiring public companies to disclose in their proxy materials the relationship between executive compensation actually paid, and the financial performance of the company.

I believe that today’s proposal thoughtfully fulfills that mandate. The net result of the proposed rule should be enhanced pay versus performance disclosure in the proxy statement. It should make it easier for shareholders to locate, understand, and analyze executive compensation information before they have to vote.

The Commission’s current rules require that shareholders receive a proxy statement prior to a shareholder meeting. The proxy statement must disclose all the important facts about the issues on which shareholders may be asked to vote. Today’s proposed rule should provide shareholders, via the proxy statement, meaningful new information and metrics to aid in making informed decisions.

The Senate Report that accompanies Section 953(a) of the statute noted: “It has become apparent that a significant concern of shareholders is the relationship between executive pay and the company’s financial performance…The Committee believes that these disclosures will add to corporate responsibility as firms will have to more clearly disclose and explain executive pay.”

In order “to more clearly disclose and explain executive pay” in this context, the Commission is proposing to use a standardized, machine readable table. This table includes, in one location, easy to understand data regarding the last five years of a company’s financial performance. Financial performance data would be presented directly next to the data detailing the compensation of the company’s executive officers during the last five years.

This simple presentation should make it easier for shareholders to understand the relationship between executive pay and company performance. In addition to providing data on compensation “actually paid” to certain executive officers, the proposed table requires registered companies to include the Summary Compensation Table figures for certain executive officers. Including these numbers in the pay versus performance table is vitally important. It would allow shareholders to view a measure of pay that excludes changes in the value of equity grant awards. Providing two measures of compensation in the table may facilitate meaningful comparison, especially in situations where the “actually paid” figure may be misleading or not reflective of the true compensation package awarded to an executive in a given year.

Comparability is also an important part of the proposal. Requiring each registrant to complete this standardized table should promote comparability across all companies. Each registrant would be required to provide data responsive to the same questions, year after year, with clear direction on exactly what the table requires. This comparability also should promote robust data analysis going forward.

Along with providing data in the table, registrants would provide supplemental disclosure about the relationship between executive compensation and performance. The proposed rule appropriately recognizes that some flexibility may be needed to demonstrate this relationship. For example, registrants may describe the relationship in narrative form or by means of a graph or chart. Registrants would be allowed to describe this relationship in a way that is best suited to their particular circumstances. The combination of a standardized table and a more flexible disclosure following the table is a sensible way to ensure comparability and uniformity, while still providing companies with some appropriate flexibility in disclosure.

Finally, I have been a consistent advocate for data tagging of Commission forms, so I am very pleased to see that pay versus performance disclosure, as proposed, will be tagged in eXtensible Business Reporting Language, or XBRL. The proposed rule sets forth an approach toward incorporating machine readable data for communicating compensation and performance information. XBRL streamlines the collection and reporting of financial information. XBRL data tagging involves a process in which a company essentially marks certain parts of its financial disclosure with specific defined terms from a shared dictionary, referred to as a “taxonomy”. All registrants use the same shared taxonomy, which allows for comparability across companies.

In order to achieve comparability, we need structured data in formats like XBRL. Today’s proposal would represent the first piece of data in the proxy statement to be tagged and is hopefully a harbinger of things to come. We should be moving toward having the entire proxy statement tagged, and this is a great first step.

As the SEC Investor Advisory Committee noted in its recommendation advocating for more data tagging, “modern technology provides the SEC with the opportunity to unlock far greater value from the information that it collects and stores.” I personally believe that tagging the entire proxy statement would unlock great value for both the Commission and shareholders.

The current proposal is to have pay versus performance disclosure tagged in XBRL. It is my hope and expectation that this disclosure would be tagged in Inline XBRL once available, which would allow companies to file the required information and data tags in one document rather than repeated in separate exhibits. I understand that Inline XBRL is not yet available on the SEC’s Electronic Data Gathering Analysis and Retrieval (EDGAR) system, but soon will be. When that day comes, Inline XBRL should be used for pay versus performance and all other parts of the proxy statement.


*Kara M. Stein is a Commissioner at the U.S. Securities and Exchange Commission. This post is based on Commissioner Stein’s recent public statement, available here. The views expressed in the post are those of Commissioner Stein and do not necessarily reflect those of the Securities and Exchange Commission, the other Commissioners, or the Staff.

Related research from the Program on Corporate Governance about CEO pay includes Paying for Long-Term Performance (discussed on the Forum here) and the book Pay without Performance: The Unfulfilled Promise of Executive Compensation, both by Lucian Bebchuk and Jesse Fried.

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