On February 16, the Securities and Exchange Commission’s Division of Corporation Finance issued new Compliance and Disclosure Interpretations (C&DIs) on executive compensation reporting under Regulation S-K. The SEC also published new C&DIs addressing proxy disclosure obligations with respect to outgoing directors and the timing of filing current reports under new Item 5.07 of Form 8-K.

The SEC’s new guidance on executive compensation disclosures included the following:

  • The SEC stated that for registration statements on Form S-1 for which an issuer seeks effectiveness after the end of the issuer’s fiscal year but before the issuer’s annual report for such year is filed on Form 10-K, the registration statement must include executive compensation disclosure under Item 402 of Regulation S-K for such fiscal year before it can be declared effective.
  • The SEC opined that if an executive officer receives an equity award which, by its terms, does not provide for acceleration of vesting, and such equity award is subsequently modified to provide for vesting acceleration upon the occurrence of a certain event (such as the executive’s departure), the issuer must include in its Summary Compensation Table for the grant year the original fair value of the award as of the grant date, and in the year in which the acceleration occurs the incremental fair value as a result of acceleration. If the award grant and the subsequent acceleration for such award occur in the same year, then the executive’s total compensation for that year should include the original fair value of the award and the incremental fair value due to acceleration.
  • The SEC stated that if an executive receives an annual incentive award which, by its terms, does not permit stock settlement, and the executive subsequently agrees with the issuer to settle the award in stock, the award should be reported (1) in the non-equity incentive plan award column of the Summary Compensation Table with an appropriate footnote and (2) in the estimated future payouts under non-equity incentive awards columns of the Grants of Plan-Based Awards Table. The SEC further asserted that the stock issued to the executive upon settlement of the incentive award should not be included in the Grant of Plan-Based Awards Table.
  • The SEC stated that if an executive receives an annual incentive award which allows for settlement in stock or cash, and the executive elects to settle the award in stock, the award should be included in the Summary Compensation Table and Grant of Plan-Based Awards Table for such year as an equity incentive award. If the executive elects to settle the award in cash, the award should be included in each table for such year as a non-equity incentive plan award.

The SEC’s guidance also provided that disclosures under Item 401(e) of Regulation S-K, which requires a description of the business experience and other directorships held by directors, need not be made in an issuer’s proxy statement for any directors whose terms will not continue after the shareholders meeting.

In addition to the C&DIs provided with respect to Regulation S-K, the SEC clarified that current reports filed on Form 8-K pursuant to the new Item 5.07, which requires an issuer to disclose the results of voting at any shareholders meeting, must be filed by the fourth business day following the date on which the shareholder meeting ends.

The SEC’s adoption of new governance disclosures and Item 5.07 was previously reported in the December 18 edition of Corporate and Weekly Financial Digest, as well as a Katten Client Advisory published on January 7.

Click here to view the C&DIs (Questions 116.07, 117.05, 119.22 and 119.23) with respect to Regulation S-K.

Click here to view the new C&DI (Question 121A.01) with respect to Form 8-K.