Much of the talk this summer has been about the proposed new compensation clawback rules. But I wanted to follow-up on the Pay vs. Performance Reporting rules proposed in April, which may have more relevance for companies’ preparation for the upcoming proxy season. No, the P4P rules won’t be effective for next season, but compensation committees will begin thinking about performance metrics again this fall or winter, most likely for awards to be made in 2016.

Much of the talk this summer has been about the proposed new compensation clawback rules. But I wanted to follow-up on the Pay vs. Performance Reporting rules proposed in April, which may have more relevance for companies’ preparation for the upcoming proxy season. No, the P4P rules won’t be effective for next season, but compensation committees will begin thinking about performance metrics again this fall or winter, most likely for awards to be made in 2016. If you have not already had a discussion with the comp committee about the proposed P4P rules, you should. This is especially true if you use a performance metric other than relative TSR.

The rules are not final yet, of course, and significant changes could be made. However, despite widespread criticism of relative TSR, it seems hard to believe that the SEC will base its required reporting on a metric other than relative TSR given the plain language of Dodd-Frank Act Section 953. Committee members should know that the SEC has placed its thumb on the scale in favor of relative TSR. Since companies now will be required to report their TSR and compare it in easy-to-read chart form against the average TSR of their peers, many readers are likely to focus on that chart rather than committees’ explanations of the unique performance measures they use.

As I said in my Agenda interview (partially excerpted below), “Companies that don’t currently use relative TSR as a metric in executive pay will have a couple of options. One is to switch to TSR as a performance measure. The other is to explain in the proxy’s Compensation Disclosure & Analysis section why the existing metric is better for the company.”