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Speech


 
 

Executive Compensation: Looking Beyond the Dodd-Frank Horizon

Keith F. Higgins, Director, Division of Corporation Finance

National Institute on Executive Compensation
American Bar Association, Washington, DC

Nov. 17, 2015

Thank you for your kind introduction and for inviting me to speak to you today. I’m particularly pleased to once again be a participant in the National Institute. It is a program with which I go way back — back to the days when it was held at the Plaza Hotel in New York, chaired year after year by my good friend Pam Baker and the late Stuart Lewis. The program remains in exceptionally good hands with co-chairs Andrew Liazos and Martha Steinman, and I know that you have been treated over the past two days to everything that you need to know about executive compensation. I’d like to change course and move away from that which you need to know, turn away from the past and the present and look a bit into the future. This group is a particularly good one with which to share these forward-looking musings. You are discerning consumers of our rules relating to the disclosure of executive compensation and the distribution of employer securities and I hope my remarks today will cause you to think about how we can make our rules better — both for companies and for investors.

Before I begin, of course, I need to provide the standard disclaimer that my remarks are my own views and do not necessarily reflect the views of the Commission or any of my colleagues on the staff of the Commission.[1]

Since 2010, the Commission’s rulemaking agenda in executive compensation has been dominated by the mandated requirements under the Dodd-Frank Wall Street Reform and Consumer Protection Act. The Commission has adopted rules on say on pay, say on frequency, say on parachutes, listing standards for compensation committees and conflicts of interest for compensation consultants, and pay ratio. Proposals are out on the remaining mandates — hedging, pay versus performance and compensation clawbacks. The comment periods on the last three proposals have closed and the Division is busy working on recommendations for final rules to present to the Commission. Although I don’t want to — and won’t — speculate on when you might expect to see final rules, I believe that we are beginning to see light at the end of the tunnel.

So, what’s next? Division staff is currently hard at work on our Disclosure Effectiveness project, looking at Regulation S-K, Regulation S-X and the way that companies convey information in our disclosure regime. As you know, the initial effort is focused on the business and financial information that populates annual and quarterly reports. We expect next to turn to turn to the executive compensation and corporate governance information that populates the proxy statement. I certainly don’t want to front run that effort in what I say today, although I will offer a few observations that have relevance for that topic. I’d like to start by touching on some discrete items that, while maybe not of monumental significance, are nonetheless worthy in my view of consideration.

Item 10 of Schedule 14A

More years ago than I would like to remember, I was asked to contribute to a chapter in a treatise on proxy disclosure entitled “Special Considerations in Adopting and Amending Employee Stock Plans.” Okay, it wasn’t the most irresistible chapter in the treatise but it introduced me to the world of Item 10 of Regulation 14A.

Although our disclosure rules generally do not call for specific disclosures about the features and mechanics of executive compensation plans, one significant exception to that general rule comes when a company is seeking shareholder approval for a plan under which cash or non-cash (e.g., equity) compensation is to be paid. If a company proposes to take action on any such plan, Item 10 of Schedule 14A requires that the proxy statement describe briefly the material features of the plan, identify each class of persons eligible to participate in the plan, indicate the approximate number of persons in each class, and state the basis of their participation.[2]

All too often, the “brief” description of the material features of the plan called for by Item 10 is rarely brief. Although there is no prescribed length, companies typically devote at least a page — and often quite a number more — in their proxy statements to these plan descriptions. The disclosure typically describes how the plan works, who administers it, what types of awards can be made, the criteria used to determine awards, how key components of the award are determined and the number of shares that may be subject to awards, or the amount of cash that can be distributed in a cash incentive plan. Although I’m not exactly sure how this disclosure practice came to pass, the type of information that is typically provided is frequently similar to the requirements for plan descriptions in prospectuses under Form S-8.[3] Do our rules need to provide better guidance about the matters that a company should cover in its “brief” description, or might that lead to a checklist approach? Should the Commission require a format that better summarizes the key features of the plan? Are investors getting the information they need to make an informed voting decision about the plan (more on that later) or is the level of disclosure a little too much “in the weeds?” A copy of the plan must be filed with the Commission at the time the proxy material is filed, and must be available electronically, although it need not be included with the proxy materials distributed to shareholders.[4] How should the electronic availability of the plan document itself factor into the disclosure the company is required to make of the features of the plan?

Item 10 also requires a New Plan Benefits table in which companies provide in tabular format the benefits that will be received by or allocated to specified persons and groups under the plan, where those benefits are determinable.[5] This disclosure is required both when a plan is being amended and when a new one is being initially adopted. If, as is often the case with discretionary plans, the benefits or amounts to be received are not determinable, the table must include benefits or amounts that “would have been received by or allocated to [the persons and groups in the table] for the last completed fiscal year if the plan had been in effect, if such benefits or amounts may be determined. . . .”[6] That language might lead one to conclude, for example, that for a plan amendment simply increasing the number of shares available under the plan the table should disclose the amounts that the specified persons and groups received in the prior year under that plan. But what if a plan is being newly adopted? How do you determine what would have been received or allocated? Should those situations produce different results? Is additional guidance necessary? It is also worth noting that this table was part of our rules well before the current compensation tables that appear in the proxy statement. Are there revisions to this table we should be considering to capture the information that is important to investors, but also reduce duplicative disclosure?

In addition to the requirement to provide a brief description of a plan’s material features, Item 10 requires additional information for specific types of plans. One set of rules addresses requirements when a pension or retirement plan is being submitted for shareholder approval. I am quite confident I never encountered such a situation in the 30 years I practiced law, although surely at one time these plans must have been submitted to shareholders. Is this requirement outdated? In addition, if the shareholder action relates to a plan under which options, warrants, or rights are granted, or to a specific grant of these rights, Item 10 lists several additional requirements. Much of this detailed, line-item information is likely included in the company’s description of the material features of a plan or in the New Plan Benefits table, although there are some requirements that might not otherwise be included. For example, there is a requirement to state the federal income tax consequences of the issuance and exercise of options both to the recipient and to the company. This requirement is limited only to options — and does not include restricted stock, cash-only rights or other types of awards. If investors consider this information important in deciding how to vote on a plan, wouldn’t it make sense to expand this requirement beyond options to include all forms of equity compensation? But is the tax effect of equity compensation arrangements important information for investors?

Item 10 also requires a company to furnish the information required by Item 201(d) of Regulation S-K. As you know, Item 201(d) requires companies to include a table disclosing the number of outstanding securities and the number of securities remaining available for future issuance on an aggregated basis for all plans that have been approved by shareholders and for all plans that have not received shareholder approval.[7] The company must also identify and describe the material features of each equity compensation plan that was adopted without shareholder approval. The Commission adopted these requirements in 2001[8] before the listing requirements for shareholder approval of equity plans by the NYSE[9] and NASDAQ[10] in effect made non-approved equity plans a thing of the past. Has this table, which was first required at a time when non-shareholder approved plans were practically an epidemic, now outlived its usefulness? Are any features of this table important to investors? These are certainly questions worth asking as we approach the phase of our Disclosure Effectiveness project that addresses executive compensation and governance disclosures.

Finally, can we learn something about what disclosure should be required from the shareholder suits brought against companies in connection with compensation plan approvals? Following a spate of such lawsuits, some practitioners have been advising companies to expand the disclosure typically provided in connection with a plan adoption to include such items as, for example, a discussion of how the number of shares for which approval is sought was arrived at, the company’s equity burn rate over the past several years, and the length of time that the company believes the shares being approved will last.[11] Should items such as these be mandated in our disclosure regime in addition to the currently required items, or perhaps instead of one or more of them?

Form S-8

Moving now from disclosure to distribution, I would like to turn to a discussion of Form S-8, the registration statement that is available for the offer and sale of employee benefit plan securities. In 1990, the Commission adopted substantial revisions to Form S-8. Among the more significant changes, the revisions allowed companies to use offering materials that constituted prospectuses for Securities Act purposes, but that did not need to be filed with the registration statement, either initially or upon their use. The revisions also made the Form S-8 registration statement effective immediately upon filing and provided a simplified method of filing a new registration statement to register additional securities that incorporated by reference the information in an earlier filing.[12] These changes made it easier for companies to administer their stock plans without sacrificing any information that their employee investors needed for their investment decisions. But it has been 25 years since these changes were adopted. What else might be done?

Several years later, as part of sweeping changes in Securities Offering Reform, the Commission adopted rules that permit well-known seasoned issuers, or WKSIs, to register unspecified amounts of securities on immediately effective registration statements. In addition, WKSIs that use automatic shelf registration statements are permitted to pay filing fees on a “pay-as-you-go” basis at the time of each takedown. This feature provides WKSIs the flexibility to incur filing fees if and when they decide to proceed with an offering. Form S-8 does not have that same flexibility. So a WKSI that can do billion dollar shelf takedowns on a pay-as-you-go basis needs to determine in advance of filing an amount of securities that it will offer under an employee compensation plan and pay the associated fee. This requirement is not likely a challenge for a plan that issues options or restricted stock, which will typically have a fixed or calculable number of shares reserved for issuance. It does, however, become more problematic for a tax-qualified plan, such as a 401(k), that has a company stock investment option, where it is not possible in advance to know how many shares will be offered and sold. Should we consider whether Form S-8 should provide issuers the option to pay-as-they-go? If so, how should this feature be structured to take into account that investment decisions by employees, rather than the company, determine how many shares are sold? Should the flexibility be limited just to WKSIs, or is this accommodation something that should be made more broadly available? If our rules were to accommodate such a feature, should companies have to re-file a new Form S-8 every three years, as WKSIs do, or perhaps some other appropriate interval?

Having mentioned qualified plans, I would like to turn next to that topic. In the wake of the Supreme Court decision in Daniel,[13] the Commission issued two interpretive releases that have served as the foundation for the treatment of separate interests in employee benefit plans for almost 35 years.[14] It is unquestionable that the varieties of compensation arrangements available to employees today have changed dramatically over that time. Defined benefit pension plans are becoming more and more scarce. In their place, if an employer provides any retirement plan at all, are 401(k) plans into which employees can contribute their pre-tax dollars and in which employers will often make matching contributions. Some plans offer a company stock fund as an option for investment, and if any employee money can be used to purchase interests in this fund the staff has been of the view that registration under the Securities Act is required.[15] Increasingly, however, some plans are offering participants the ability to invest their 401(k) account balances through what is in effect a self-directed brokerage account. Generally, a self-directed brokerage account allows participants to invest in a variety of securities such as stocks, bonds and mutual funds that might include employer securities. Some have questioned whether registration under the Securities Act should be required when an employer offers a self-directed brokerage alternative in its 401(k) plan that does not prohibit — and therefore permits — purchases of employer securities. Although the staff has traditionally viewed employer involvement in establishing a 401(k) plan as being beyond ministerial activities, and therefore requiring registration, maybe it is time that we reexamine this analysis at least for 401(k) plans with self-directed brokerage accounts in which employer securities could be, but may never be, purchased? How do other regulatory restrictions under tax and ERISA rules that apply to 401(k) plans affect these self-directed brokerage accounts or plans generally?

To be sure, having employees with significant concentrations of their retirement savings invested in employer securities can be a potential problem — and one that has turned very real in several instances.[16] But is the problem a securities law problem? What does Securities Act registration offer that ERISA does not? Has the threat of Securities Act liability in fact provided meaningful employee-investor protection or has registration been largely a compliance exercise? The principal guidance on qualified plans is now 35 years old and in my view is probably worth taking a fresh look at.

Regulation S-K Disclosure Requirements

Let’s turn now to disclosure. Almost 10 years have passed since the Commission adopted amendments that significantly revised our compensation disclosure rules.[17] Those amendments were intended to provide investors with a clearer and more complete picture of the compensation to principal executive officers, principal financial officers, the other highest paid executive officers and directors. When the Commission adopted those amendments, it noted that it sought to combine a broader-based tabular presentation with improved narrative disclosure supplementing the tables to promote clarity and completeness.

Judging by the page count of proxy statements following implementation of the rules, the goal of completeness was relatively successful. One might wonder, however, whether the goal of clarity is being met. Since the enactment of the Dodd-Frank Act and, in particular, the adoption of mandatory say on pay, compensation disclosures appear to have taken a turn for the better. Many companies have significantly changed the way they approach both their disclosure and their engagement with shareholders on their executive compensation arrangements. Reports indicate that say-on-pay voting significantly affected the design and communication of executive pay packages and many companies have increased their shareholder engagement efforts.[18] On the other hand, investor surveys have also continued to indicate a general dissatisfaction with the clarity and readability of executive compensation disclosure.[19] As the staff and the Commission work to finalize the remaining Dodd-Frank Act executive compensation rules, I think it makes sense to continue to assess the current rules and look for ways to improve them.

CD&A

Let’s start with the same place that many investors start their proxy review: the Compensation Discussion and Analysis (CD&A). As you know, the CD&A was intended to provide a discussion that explains all of the material elements of the company’s compensation and place the numbers and tables that follow it — which I’ll discuss shortly —into perspective for investors. The Commission required companies to explain all of the material elements of the executive compensation for their named executive officers and describe how the compensation met the objectives and policies they set for their program.

To elicit this disclosure, Item 402(b) of Regulation S-K provides a list of seven mandatory topics and an additional list of fifteen examples of types of information to consider in fulfilling the CD&A mandate to “explain all material elements of the registrant’s compensation of the named executive officers.”[20] These 22 items are not — and were not intended be — a checklist of items that must be included. Rather, the disclosure only needs to be included if the company believes it is material to an understanding of its executive compensation. As the Division explained in its 2007 Guidance, “[t]he principles-based disclosure concept allows each company to assess its own facts and circumstances and determine what elements of the company’s compensation policies and decisions are material and warrant disclosure.”[21]

If a company’s decision to touch all or most of those 22 “bases” is affected by a sense that some market participants expect each to be covered since they are listed in the Item, is this provision serving its intended purpose or has it become a checklist? Are the 22 “bases” contributing to the complexity and general dissatisfaction with company compensation disclosure, rather than assisting companies with examples of information that may be material to their compensation objectives and policies? How prescriptive should the CD&A requirements be? If the Commission considered revisions to these 22 “bases,” how would issuers interpret any changes?

Further, in light of the impacts of say on pay, what changes, if any, should we be considering? A few investor surveys have highlighted continued feedback from investors that the CD&A needs to be more than a compliance document that only lawyers would “enjoy” reading.[22] How do we create incentives for companies to tell their story in a clear and effective manner? Is the say-on-pay vote just such an incentive and, if so, is it working to improve the disclosure? As the length of the CD&A has increased over the past several years,[23] more and more companies are including a CD&A Executive Summary. Is the CD&A Executive Summary more effectively conveying the information that the CD&A was intended to convey?

Compensation Tables

Next, let’s move on to the tables. Since 1992, the Commission’s rules have required several formatted tables that sought to capture all compensation and promote comparability from year to year and from company to company.[24] Throughout this time, the Summary Compensation Table has been the cornerstone of the Commission’s required executive compensation disclosure. The Summary Compensation Table requires, in a single location, a comprehensive presentation of a company’s compensation for its named executive officers. Certainly, a tabular presentation of a company’s executive compensation provides various advantages for issuers and investors. The notion that an investor can look to one place that summarizes a company’s compensation does not appear to have outlived its usefulness.

But could the Summary Compensation Table be improved? As the adopting release acknowledged,[25] the timing of disclosure of cash and equity in the Summary Compensation Table varies. As all of you know, a cash incentive plan award that is paid following the end of a fiscal year based on performance for that year shows up as non-equity incentive plan award in the Summary Compensation Table. By contrast, an equity award that is paid out based on the same performance appears as an equity award in the year in which it was granted — i.e., the year after the performance. Is that a problem and, if so, is it a problem worth fixing? Does this anomaly result in more discussion in the CD&A, adding bulk to the already substantial disclosure that is being provided? Should we re-consider the “performance year” approach to reporting equity grants?

The Summary Compensation Table is followed by other tables and disclosure containing more specific information on the components of compensation for the last completed fiscal year. This disclosure includes, among other things, information about grants of plan-based awards, outstanding equity awards, option exercises and stock vested, pension plans, nonqualified deferred compensation, termination and change-in-control payments and director compensation. Are all these layers of tables the most effective way to present executive compensation disclosure? I suspect that if we ask investors they will tell us that there is very little of the information in these tables that is not useful to them in their investment and voting decisions.

At the same time, a survey found that fifty-five percent of investors believe that a typical proxy statement is too long and the ideal length of a proxy is about 25 pages.[26] That ideal length is close to the length of the average annual meeting proxy statement used a decade ago (about 30 pages) and a fraction of the average length today (averaging 60 to 80 pages).[27] Is there a way to preserve the information in the tables for the investors that are interested in the layered details, but also reduce the proxy statement disclosure to a more manageable length?

Should we, for example, consider leaving the Summary Compensation Table in the proxy statement but having some of the “layered” tables included only in the company’s Form 10-K? I am not the first person to ask this question. In fact, in 1995, the Commission proposed amendments that would permit companies to provide, only in their Form 10-K, some of the executive compensation disclosure that is currently required in the proxy statement.[28] That proposal would have limited the streamlined disclosure to proxy statements involving the annual election of directors, excluding proxy statements involving approval of compensation plans. If such a streamlined change to the proxy statement is considered again, should the streamlined disclosure be permitted every year, regardless of whether the company is seeking the approval of a compensation plan? What tables, if any, beyond the Summary Compensation Table should be provided in the proxy statement? Would it be practicable to require that the tables be filed in the Form 10-K only, since many companies file their Forms 10-K well before the definitive proxy statement is complete? Could the additional tables be included as an appendix to the proxy statement, available on the version filed on EDGAR but not required to be included in the proxy statement that is distributed to shareholders? As companies and investors become more accustomed to company web sites as a place where important information is disseminated, might we consider permitting the tables to be disclosed only on a company’s web site? If so, how would we make sure that the disclosure controls and procedures and the certifications that apply to periodic reports apply to information filed on the web site?

Compensation Committee Report

Finally, I’ll conclude with a few remarks about the Compensation Committee Report. Before we discuss the current requirements, however, I think it’s helpful to briefly discuss the historical requirements. From the adoption of the 1992 rules until the adoption of the 2006 amendments, Commission rules required the submission of a Compensation Committee Report on Executive Compensation that required the compensation committee to provide information similar to, but less extensive than, the current CD&A.[29]

When the Commission adopted the CD&A requirement in 2006, it also adopted a requirement for a revised Compensation Committee Report that was similar to the existing Audit Committee Report.[30] This report requires the compensation committee to disclose whether it has reviewed and discussed the CD&A with management and whether, based on the review and discussions, it recommended to the board of directors that the CD&A be included in the company’s annual report on Form 10-K and, as applicable, the company’s proxy or information statement.[31] In mandating this report over the names of the committee members, the Commission noted that the company’s principal executive officer and principal financial officer will be able look to the report in certifying the CD&A disclosure.

This July, the Commission issued a concept release to consider the existing audit committee report to see if there are ways to make it more useful to investors.[32] The concept release invites comment on whether Commission disclosure requirements should be refined to provide more insight into the information the audit committee used and the factors it considered in overseeing the independent auditor. Since the Compensation Committee Report was modeled after the Audit Committee Report, should we also be considering whether changes are appropriate to provide more insight into the information the compensation committee used and the factors it considered in evaluating the company’s executive compensation? Further, should we go back to the basics and consider the purpose that this report is serving and the value to investors in retaining this report?

Conclusion

Although the Division continues to have quite a full agenda, I believe it is always appropriate to consider changes to update our rules related to executive compensation and corporate governance to make them work better both for investors and companies.

I want to encourage every person in this room to join the discussion and share your ideas on suggestions to improve and modernize our rules related to executive compensation.

Thank you for your attention. I look forward to answering your questions in the time that we have remaining.



[1] The Securities and Exchange Commission, as a matter of policy, disclaims responsibility for any private publication or statement by any of its employees. The views expressed herein are those of the author and do not necessarily reflect the views of the Commission or of the author’s colleagues upon the staff of the Commission.

[2] See Paragraph (a)(1) of Item 10 of Schedule 14A.

[3] See Item 1, Part I of Form S-8.

[4] See Instruction 3 to Item 10 of Schedule 14A.

[5] See Paragraph (a)(2)(i) of Item 10 of Schedule 14A.

[6] See Paragraph (a)(2)(iii) of Item 10 of Schedule 14A.

[7] See Item 201(d) of Regulation S-K.

[8] See Disclosure of Equity Compensation Plan Information, Release No. 33-8048, 34-45189 (Dec. 21, 2001), available at: https://www.sec.gov/rules/final/33-8048.htm.

[9] Release No. 34-48108 (June 30, 2003). New York Stock Exchange, Listed Company Manual § 303A.08.

[10] Release No. 34-48108 (June 30, 2003); Nasdaq Listing Rule 5635(c) and IM-5635-1.

[11] See, e.g. Litigation over proxy statement disclosure — another update; Michael S. Melbinger, Winston & Strawn LLP (March 20, 2013), available at: http://www.lexology.com/library/detail.aspx?g=95da7e33-8724-4704-8864-ebb37cbb5acd; Round Two of Shareholder Say-on-Pay Litigation, Robert L. Hickok and Gay Parks Rainville, Pepper Hamilton LLP (June 4, 2013) http://www.pepperlaw.com/publications/round-two-of-shareholder-say-on-pay-litigation-2013-06-04/; and Defending the Latest Wave of Proxy Litigation: Say-on-Pay and Equity Plan Shareholder Class Action Injunction Lawsuits, Latham & Watkins LLP (Jan. 2013), available at: https://www.google.com/url?sa=t&rct=j&q=&esrc=s&frm=1&source=web&cd=1&ved=0CB4QFjAAahUKEwjH-4PjmvrIAhVBmx4KHUGkBiI&url=https%3A%2F%2Fwww.lw.com%2FthoughtLeadership%2Fdefending-latest-wave-proxy-litigation&usg=AFQjCNE8D692v7er_8EH33GotCWIVc-GTA.

[12] Securities Act Release No. 6867 (June 6, 1990) [55 FR 23909].

[13] See International Brotherhood of Teamsters v. Daniel, 99 S. Ct. 790 (1979).

[14] See Employee Benefit Plans; Interpretation of Statute, Release No. 33-6188 (Feb. 1, 1980) [45 FR 8960] available at: https://www.sec.gov/rules/interp/33-6188.pdf; and Employee Benefit Plans, Release No. 33-6281 (Jan. 15, 1981) available at: https://www.sec.gov/rules/interp/33-6281.pdf.

[15] The Commission has specified limited ministerial activities — such as processing payroll deductions — that a company can perform for an open market employee stock purchase plan without the company or its affiliates being deemed to have solicited an offer to buy company stock. See Employee Stock Purchase Plans, Release No. 33-4790 (July 13, 1965), available at: https://www.sec.gov/rules/interp/33-4790.pdf. Setting up a 401(k) plan has generally been considered to exceed the permissible activities.

[16] See “Employees’ Retirement Plan is a Victim as Enron Tumbles,” NY Times, Nov. 22, 2001, available at: http://www.nytimes.com/2001/11/22/business/employees-retirement-plan-is-a-victim-as-enron-tumbles.html; See also FINRA Investor Alert: Putting Too Much Stock in Your Company — A 401(k) Problem, available at: https://www.finra.org/investors/alerts/putting-too-much-stock-your-company_a-401k-problem.

[17] See Executive Compensation and Related Person Disclosure, Release Nos. 33-8732A; 34-54302A; IC-27444A (August 26, 2006) [71 FR 53158], available at: http://www.sec.gov/rules/final/2006/33-8732a.pdf (the “2006 Adopting Release”).

[18] See 2015 Innovations in CD&A Design: A Proxy Disclosure Analysis Executive Summary, Equilar, available at: http://info.equilar.com/rs/equilar/images/equilar-2015-innovations-in-cda-design-exec-summary.pdf; and Defining Engagement: An Update on the Evolving Relationship Between Shareholders, Directors and Executives, IRRC Institute and Institutional Shareholder Services (2014), available at: http://irrcinstitute.org/wp-content/uploads/2015/09/engagement-between-corporations-and-investors-at-all-time-high1.pdf.

[19] See, e.g., 2015 Investor Survey: Deconstructing Proxy Statements— What Matters to Investors, RR Donnelley, Equilar Inc. and Stanford University, available at: https://www.gsb.stanford.edu/sites/gsb/files/publication-pdf/cgri-survyey-2015-deconstructing-proxy-statements_0.pdf. See also Highlights from RR Donnelley’s Groundbreaking Investor Survey, RR Donnelley (surveying institutional investors during August and September of 2013) available at: http://www.niri.org/Other-Content/sampledocs/RR-Donnelley-Investor-Survey.aspx.

[20] See Item 402(b) of Regulation S-K.

[21] “Staff Observations in the Review of Executive Compensation Disclosure,” available at http://www.sec.gov/divisions/corpfin/guidance/execcompdisclosure.htm.

[22] See Highlights from RR Donnelley’s Groundbreaking Investor Survey, RR Donnelley (surveying institutional investors during August and September of 2013) available at: http://www.niri.org/Other-Content/sampledocs/RR-Donnelley-Investor-Survey.aspx; and 2015 Investor Survey: Deconstructing Proxy Statements— What Matters to Investors, RR Donnelley, Equilar Inc. and Stanford University, available at: https://www.gsb.stanford.edu/sites/gsb/files/publication-pdf/cgri-survyey-2015-deconstructing-proxy-statements_0.pdf.

[23] See Highlights from RR Donnelley’s Groundbreaking Investor Survey, RR Donnelley (surveying institutional investors during August and September of 2013) available at: http://www.niri.org/Other-Content/sampledocs/RR-Donnelley-Investor-Survey.aspx (noting that the median CD&A length has increased 26% since 2008); and 2015 Innovations in CD&A Design: A Proxy Disclosure Analysis, Equilar, available at: http://images.info.rrd.com/Web/RRDonnelleySonsCompany/%7B3b08305f-120c-4dba-90d4-41b4dba44326%7D_GCM_Proxy_20150219_2015_Innovations_in_CDA_Design.pdf?utm_campaign=&utm_medium=email&utm_source=Eloqua (noting an increase of 15% in the CD&A word count from 2009 to 2014).

[24] See Executive Compensation Disclosure, Release Nos. 33-6962; 34-31327; IC-19032 (October 16, 1992) [57 FR 48126] (the “1992 Adopting Release”); and 2006 Adopting Release.

[25] 2006 Adopting Release at Section II.C.1.a.

[26] 2015 Investor Survey: Deconstructing Proxy Statements— What Matters to Investors, RR Donnelley, Equilar Inc. and Stanford University, available at: https://www.gsb.stanford.edu/sites/gsb/files/publication-pdf/cgri-survyey-2015-deconstructing-proxy-statements_0.pdf.

[27] See Highlights from RR Donnelley’s Groundbreaking Investor Survey, RR Donnelley (surveying institutional investors during August and September of 2013) available at: http://www.niri.org/Other-Content/sampledocs/RR-Donnelley-Investor-Survey.aspx; and 2015 Investor Survey: Deconstructing Proxy Statements— What Matters to Investors, RR Donnelley, Equilar Inc. and Stanford University, available at: https://www.gsb.stanford.edu/sites/gsb/files/publication-pdf/cgri-survyey-2015-deconstructing-proxy-statements_0.pdf.

[28] See Streamlining and Consolidation of Executive and Director Compensation Disclosure, Release Nos. 33-7184; 34-35894 (June 27, 1995) [60 FR 35633], available at: http://www.sec.gov/rules/proposed/33-7184.txt.

[29] See 1992 Adopting Release. Specifically, the rules required the compensation committee to present a report, over the names of the individual members of the committee, disclosing the company’s executive compensation policies, the specific relationship of corporate performance to executive compensation, the factors and criteria on which the compensation of the chief executive officer (CEO) was based and a specific discussion of the relationship of the company’s performance to the CEO’s compensation, including a description of each measure of company performance on which the CEO’s compensation was based.

[30] See 2006 Adopting Release at Section II.B.3.

[31] See Item 407(e)(5) of Regulation S-K.

[32] See Possible Revisions to Audit Committee Disclosures, Release Nos. 33-9862; 34-75344 (July 1, 2015) [80 FR 38995], available at: http://www.sec.gov/rules/concept/2015/33-9862.pdf.

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Modified: Nov. 17, 2015