On April 29, the Securities and Exchange Commission announced its proposal to add a new Item 402(v), captioned "Pay versus Performance," to Regulation S-K.2 The SEC announced the proposed rule pursuant to Dodd-Frank Section 953(a).3 Section 953(a) directs the SEC to adopt rules requiring that proxy statements and certain "consent solicitation material"4 provide "information that shows the relationship between executive compensation actually paid and the financial performance of the issuer, taking into account any change in the value of the shares of stock and dividends of the registrant and any distributions." This is in addition to information already provided under Item 402 of Regulation S-K.

Under the proposed rule, registrants would be required to show the relationship over a period of years between the pay of certain senior-level executives and the total shareholder return (TSR) for the registrant.5 Each registrant also would be required to compare, over the same period of time, its TSR with that of a peer group. A new table would be required to provide the data on which such relationships and comparisons can be made (Pay/TSR Table).

Item 402(v), including the Pay/TSR Table, would represent the latest proliferation in executive pay data inundating shareholders in proxy statements. This proliferation of data far exceeds the original purpose of proxy statements: to reasonably inform shareholders as to matters scheduled to be voted on by them, or that reasonably relate to such matters, at annual and special meetings. This subject is further discussed in the last section of the column.

The release containing the proposed rule does not state when the rule, if adopted, would become effective. Comments on the proposed rule should be received on or before July 6, 2015.

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