Executive Summary
The 2024 proxy season marks Year 2 under the SEC’s new Pay Versus Performance disclosure framework for public companies.
The SEC issued additional guidance over the last year which clarified the requirements and commented upon registrants’ proxy filings from 2023. We discuss several of these items pertaining to valuation and equity-based compensation in this article.
Newly public companies and those private companies aspiring to list in the future should be aware of the disclosure and valuation requirements related to Compensation Actually Paid for senior executives.
With respect to equity-based awards such as stock options and performance shares with market conditions, the rules continue to point to alignment with ASC 718 and require the disclosure of any significant change in valuation techniques and assumptions.
Registrants and their advisors should pay particular attention to the impact of changes in key assumptions on the fair value of equity awards, including volatility, realized performance, and changes in the composition of total shareholder return (TSR) peer groups.