Hoosier Banker 91 On Aug. 25, the Securities and Exchange Commission issued a final rule requiring new narrative and quantitative disclosures detailing how executive compensation for the principal executive officer (PEO) and other named executive officers (NEO)1 relates to a registrant’s financial performance. New Regulation S-K Item 402(v) requires a five-year table that includes “actual” compensation paid and several performance measures: ƒ Registrant’s total shareholder return2 (TSR). ƒ TSR for the registrant’s peer group. ƒ Registrant net income. ƒ Registrant’s selected performance measure that represents the most important metric to link pay to performance. A registrant also will be required to list at least three and up to seven of their most important performance measures used to link compensation actually paid to performance for the most recently completed fiscal year. Several accommodations are available for smaller reporting companies (SRC). Registrants must include these new disclosures in proxy and information statements for fiscal years ending on or after Dec. 16, 2022. Background This final rule closes out an SEC mandate from the 2010 Dodd-Frank Act. Compensation disclosures were last updated in 2006 and included the creation of the Compensation Discussion and Analysis. Item 402 of Regulation S-K contains detailed requirements for the disclosure of executive compensation and principles-based disclosure requirements on the relationship between pay and performance. Regulation S-K Item 402(b) requires registrants to provide an explanation of all material elements for NEO compensation. For performance, the current rule includes nonexclusive examples of information that may be material, including: ƒ Specific items of corporate performance considered in setting compensation policies and making compensation decisions. ƒ How specific forms of compensation are structured and implemented to reflect the registrant’s performance. ƒ How specific forms of compensation are structured and implemented to reflect the NEO’s individual performance and/or individual contribution to the registrant’s performance. This final rule is intended to make compensation disclosures more consistent and leverages information from the Summary Compensation Table already included in proxy materials. Scope These new disclosures will be required in any proxy or information statements in which executive compensation disclosure is required by Regulation S-K Item 402, which includes the 10-K and registration statements. These disclosures do not apply to emerging growth companies (EGC), registered investment companies (RIC), or foreign private issuers (FPI). Scaled disclosures have been provided for SRCs. New Table Five years of data for the following items are required: ƒ Summary Compensation Table – Total for Peoples. ƒ Compensation actually paid to Peoples. ƒ Average Summary Compensation Table Total for non-PEO NEOs. ƒ Average compensation actually paid to non-PEO NEOs. ƒ Variable of initial fixed $100 investment based on: - TSR - Peer group TSR ƒ Net income. ƒ Company-selected measure. A registrant must identify in footnote disclosure Pay vs. Performance SEC’s new disclosures FEATURE FORVIS is an associate member of the Indiana Bankers Association. Mike Ososki Partner FORVIS mike.ososki@forvis.com Anne Coughlan Director FORVIS anne.coughlan@forvis.com
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