The SEC’s 2025 Initiative: Rethinking Executive Compensation Disclosures for a Modern Era

The world of executive compensation has never stayed still and 2025 is proving to be no exception. Last May, SEC Chair Paul Atkins released a statement announcing the SEC’s desire to rethink the executive compensation proxy disclosure rules. The SEC convened a roundtable on the topic in June, which we were pleased to attend.

The last wholesale revision to the proxy executive compensation disclosure rules was in 2006. A lot’s happened since then: a radical transformation in how long-term incentives are designed, a meteoric rise in the influence of proxy advisors, Dodd-Frank rule-making, and much more. Perhaps inevitably, there’s an interest in revisiting the rules and asking whether they support the commission’s key objectives of supporting capital formation and protecting investors.

In his opening remarks, Atkins said the rules “should be cost-effective for companies to comply with and provide material information to investors in plain English.”

As advisors who support companies in navigating the full lifecycle of equity compensation—spanning design, administration, valuation, financial reporting, and proxy disclosure—we think the proxy content can be substantially streamlined without sacrificing its usability. To that effect, we submitted a comment letter to the SEC this summer outlining recommendations to simplify executive compensation disclosures while enhancing their usefulness.

In this article, we’ll delve into the drivers behind the SEC’s initiative, key stakeholder perspectives, and the potential reforms you can expect to see. We’ll also share some thoughts drawn from many of the ideas in our comment letter.

About the Roundtable

The roundtable, a half-day affair with three panels tackling nine pointed questions, brought together diverse voices to unpack issues like the roots of compensation complexity and the ideal mix of prescriptive versus principles-based rules.

The panels brought together representatives from public companies, investors, and other subject-matter experts and advisors. Panel 1 focused on how companies develop executive compensation packages. The conversation touched on the roles of management, compensation committees, and external advisors, as well as influencing factors like business strategy and investor feedback. Panels 2 and 3 addressed the evolution of disclosure requirements since the 2006 amendments and Dodd-Frank Act mandates. Panelists discussed whether the requirements have met transparency objectives, strike reasonable cost-benefit tradeoffs, and deliver decision-useful information for investors.

Timing of Revisions

When can we expect revisions? It’s anyone’s guess. As of August 2025, the SEC is still receiving comment letters. At some point in the not-too-distant future, we expect it will begin synthesizing the feedback and working on a proposed rule revision. Depending on the scope of that revision, congressional approval may or may not be required. Assuming it’s not, we may see a proposed rule in the first half of 2026.

Any proposed rule will require comment, which will likely run 90 days. After comments are submitted, the SEC will then take time to review them in pursuit of a final rule. A final rule in the second half of 2026 wouldn’t be shocking, but given the SEC’s ambitious agenda, we also wouldn’t be surprised to see a final rule in early 2027. All that’s to say that 2027 proxies could be impacted, but our best guess is that 2028 proxies will be influenced by the revisions.

We’ll update this blog as new information becomes available.

Perspectives Likely to Carry the Day: Homogenization, Materiality, and Plain-English Information

Several themes emerged from the roundtable that could influence the direction of future revisions. Our takeaways are that the homogenization of pay structures, the materiality and decision-usefulness of disclosures, and the need for plain-English, investor-friendly communication will be the key factors that this SEC will use to evaluate which changes to implement.

1. Homogenization of Pay Structures

A central theme emerging from discussions is the homogenization of long-term incentives. On balance, there’s relatively little diversity in how long-term incentive plans (LTIPs) are structured. Consider performance share units (PSUs): Why do they almost universally feature 0-200% payout curves, three-year performance periods, and a 50-60% split between time and performance vesting?

These aren’t poor choices per se, but the uniformity of LTIP design is concerning given the wide variation in structure, industry, and business circumstances that each public company faces. Imagine what would happen if a company proposed something like a one-year absolute financial metric paired with a four-year total shareholder return (TSR) modifier that allows a payout up to 400% of target. It probably wouldn’t fly.

One possibility is that there simply is a monolithic best practice, and the status quo is that best practice. Or there could be something normative about the disclosure rules or institutional context that causes companies to make their LTIPs fit this singular model. This is the SEC’s concern. That is, the disclosure rules may somehow be influencing what companies do, instead of merely disclosing what they do.

If that’s what’s happening, then the rules are extending beyond their core purpose. This, in turn, could undermine the SEC’s interest in promoting capital formation by making public company life less attractive.

2. Materiality and Decision-Usefulness

Prior SEC leadership regimes have adopted different philosophies toward information disclosure. On the one hand, exhaustive data advances market efficiency. On the other hand, information overload hinders market efficiency.

This SEC is in the latter camp, emphasizing what information a “reasonable investor” would deem material to their decision-making. Now, for clarity, the reasonable investor may be making different types of decisions, from rendering say-on-pay votes to measuring dilution and overhang, so it’s logical to assume different cohorts of investors have different information needs. However, if opening an ice cream parlor means having to stock every last flavor, a lot of would-be ice cream entrepreneurs would say “no thanks.” And that’s how regulation can inhibit capital formation and weaken the competitiveness of the US capital markets.

3. Plain-English and Broadly Understandable Information

The roundtable auditorium echoed with statements about certain disclosure rules being “made by economists for economists” and the proxy tables devolving into “disclosure lasagna” that is virtually unusable.

This SEC is partial to disclosure that answers specific questions in plain language. “Lately, our rulemakings have taken a ‘more is better’ approach to executive compensation disclosure,” SEC Commissioner Hester Peirce said. Atkins reminded attendees that the commission “amended Item 402 of Regulation S-K in 1992 to state specifically that ‘this Item [402] requires clear, concise and understandable disclosure of…compensation.’”

Potential Revision Strategies

Incrementalist vs. Radical Revision Approach

It’s self-evident that adding one more table or analytic isn’t going to be the solution. What’s not so clear is whether the SEC will take an incrementalist or radical approach to reform.

An incrementalist approach is surgical. Under this strategy, the SEC issues revisions to multiple components of the proxy to streamline, simplify, and reorganize. For example, it could eliminate superfluous disclosures in the Item 402(v) Pay vs. Performance disclosure. Or it could harmonize the rules on perquisites with those maintained by the Internal Revenue Service. Surgical revisions are tightly scoped, easy to get through, and yield material improvements without much transition complexity. That’s because they operate around the edges.

A radical approach revisits the entire structure of the proxy. Here, entire tables disappear or get replaced with new ones. For instance, we’re interested in eliminating the sea of executive compensation tables in exchange for a single table that tracks the lifecycle of each NEO’s pay arrangement. A radical approach may do much more for the long-run usability of the proxy, but it’s risky. Much of what’s in the proxy is congressionally mandated, which could require going to Congress to approve a revision. Even if that’s avoided, a radical revision will take more time to construct and therefore may not be completable before the 2028 presidential election.

We don’t think there’s an obvious answer on which strategy is superior. Both are risky. Our comment letter aims to be as radical as it can be without suggesting steps that require the SEC to pursue new congressional action.

Potential Revision Strategies

Now let’s go through some of the larger pieces of the proxy puzzle and the sorts of revisions that could be considered.

Radical Revision: One Streamlined Table

The current setup scatters details across tables (summary compensation table, or SCT; grants of plan-based awards; outstanding equity; stock vested and options exercised), making it hard to trace pay’s lifecycle.

A streamlined solution we’ve considered is to merge equity details into one table showing beginning balances, grants, vests, and endings per award or group of awards. This feeds a revamped SCT displaying target, realized, and realized totals, with consolidated columns. We’d also fold in some surgical fixes like combining stock and options into “equity” and bonuses/non-equity incentives into one). Such changes would radically simplify the content while providing investors clearer governance insights.

Radical Revision: Three NEOs

Although it’s easy to drop one or two NEOs from the proxy, this has the potential to be radical given what we’ve heard from some investors. But in general, this one seems like low-hanging fruit. Even though it could trigger backlash, we’ve rarely seen any investor focus on NEOs number four and five. Dynamics like revolving-door executives or one-off new hires add minimal value.

Aligning to three NEOs—perhaps the CEO, CFO, and third highest-paid officer—mirrors smaller reporting company rules, easing burdens without loss of utility.

Targeted Revision: SCT

The SCT exemplifies disclosure challenges, blending disparate elements into a sometimes misleading total. Base salary and cash compensation capture earned amounts , while equity uses grant-date fair values that anticipate future earnings and represent at-risk pay. Perquisites, as we’ll discuss, should follow the IRS’ standard, and pensions and deferred compensation feel out of place here.

The bonus versus non-equity compensation distinction isn’t followed consistently and adds confusion. There doesn’t seem to be anything decision-useful in distinguishing a “spot” bonus from the ordinary course annual incentive plan—both are non-equity rewards for current year results.

But let’s zoom out to the guiding question: What should the SCT accomplish?

Should it reflect compensation committee decisions (target pay, like grant-date equity and target bonuses) or actual payouts (realized pay, such as vested values)? Both are valuable. Target pay captures the deal the board struck with the NEO, whereas realized pay captures alignment with performance.

Our view is the SCT should answer both questions because anything other than a lifecycle picture is incomplete. However, if a radical approach isn’t on the table, we suggest refining the SCT to eliminate current inconsistencies and present a crisper view of the deal struck at grant.

Targeted Revision: Harmonize Perquisite Treatment to the IRS Standard

In today’s environment of smartphones, social media tracking, and blurred work-life boundaries, security isn’t a personal perk, it’s asset protection. We’re in favor of aligning the proxy rules with IRS standards, thus treating executive security as a non-taxable fringe benefit (if it’s threat-justified) and to remove it from the SCT.

Targeted Revision: Harness PvP on What Really Matters

Pay versus performance, a Dodd-Frank requirement, has drawn mixed reviews. Issuers question its investor uptake, noting “compensation actually paid” (CAP) is not actually compensation actually paid. While part of the problem is branding (the phraseology “actually paid” clashes with all the components going into it), the composite nature of the measure may inhibit its utility.

Our view is this phraseology problem is solvable by simply decomposing the realizable pay and realized pay components more clearly and within the core table. The more important refinement opportunity is to eliminate elements of the disclosure that are redundant or not decision-useful. In our view, any of the following revisions or eliminations would simplify the disclosure.

PvP Presentation Simplifications

1. Eliminate net income as a measure in the table. Although effortless to include, it adds density without adding an iota of value given the known problems and noisiness in bottom-line net income figures.

2. Eliminate the company-selected measure (CSM) in the table. Even though this is a hand-picked measure by the registrant, it adds density and the relationship between CAP (a function of many metrics) and the CSM is spurious.

3. Eliminate the tabular list of three to seven metrics. This duplicates information shown elsewhere in the CD&A and isn’t decision-useful.

4. Eliminate the relationship disclosures required under Item 402(v)(5). Diversity in practice between presenting the disclosure in narrative, graphical, or a combination approach limits comparability. The axis placement on graphs can obfuscate the message. The core PvP table presents all the information needed in the most actionable way available.

5. Present information for the top three executives only (the CEO, CFO, and third highest-paid officer). Even if the radical revision to drop NEOs number four and five from the proxy altogether isn’t adopted, we think the merit of limiting PvP data to only three executives stands on its own.

PvP Methodology Simplifications

1. Switch from presenting a cumulative TSR measure to an annual measure. This presents a like-for-like comparison to CAP and is still convertible to a cumulative measure if desired.

2. Limit the lookback period to the current year once a company triggers a provision that requires disclosure. Although we argue elsewhere that the lookback is very helpful, any retrospective adoption of a standard poses heavy cost burdens. We think the benefits of prospective adoption outweigh the drawback of temporarily limited data.

PvP: What to Preserve?

While the starting point will often be elements of the disclosure that are superfluous, redundant, or problematic, it’s worth considering which elements are worth keeping. Some commenters may argue that nothing is worth keeping. But remember that PvP is required by congressional statute and that means it’s unlikely to be eliminated altogether.

Some areas we’ve considered and believe are worth preserving are the five-year lookback period, specification of the vesting date as the final measurement for realized pay, tracking of both realizable and realized pay, and fair value framework.

Targeted Revision: Clawback Rule

The SEC’s clawback rule is still in its infancy given its release in October 2022 and a line-in-the-sand effective date for awards received on or after October 2, 2023. However, we’ve already worked on numerous cases, and believe there are meaningful simplifications available.

First, the rule can be narrowed to only cover Big-R restatements. The prior SEC clearly thought a lot about whether to include little-r restatements and memorialized a variety of arguments for doing so. While this isn’t the forum to debate the merits of those arguments, we note the practical problem of incorporating little-r restatements, which is that recreating payouts is operationally tenuous. In addition to the difficulty effectuating a clawback on a little-r restatement, we also note that by the very definition of a little-r restatement, there wouldn’t have ever been a prior period in which the reported results were materially misstated.

A second reasonable revision to the clawback rule would be to clarify the treatment of after-tax amounts.  Requiring companies to recover the full pre-tax value of erroneously awarded compensation may simply reduce the likelihood of successful enforcement. An alternative would be to allow companies to recover net-of-tax amounts in narrowly defined circumstances, as long as this treatment is clearly disclosed in the proxy and doesn’t waive the right to full recovery.  Additional flexibility and clarification on this topic would help balance the rule’s investor protection objectives with practical enforceability and equitable treatment of executives.

Third, the checkboxes on the face of the 10-K have been an odd source of frustration and headache, even giving rise to numerous comment letters and compliance and disclosure interpretations. Our view is that these are quite superfluous with respect to a clawback. It’s one thing to document on the face of the 10-K whether or not the 10-K is restating prior period results, but linking this to a compensation clawback seems quite unnecessary.

Targeted Revision: CEO Pay Ratio

This disclosure has been live for roughly a decade now. However, there’s been little evidence as to its utility beyond producing a moderately interesting statistic.

More than potentially any other disclosure, this one seems to fail the test of being material and decision-useful to the reasonable investor. Some investors have said they reference it, but we’re not sure how it informs an investment decision given the inherent comparability problems.

Although most companies report a reduced level of effort, the disclosure can be burdensome for companies with large international footprints or frequent acquisitions. Acquisitive companies also report difficulty given their reliance on multiple systems of record. In short, on cost-benefit grounds, this rule is one of the stronger candidates for simplification within the statutory constraints.

There are several ways to streamline the requirement without eliminating it altogether.

1. Leverage the existing median employee “hold” rule. The option to maintain the same median employee for three years has proven helpful. Some have suggested going further and freezing the compensation itself, though in practice this wouldn’t reduce much effort since recalculating actual pay is straightforward.

2. Focus on the US only. Allowing companies to calculate the ratio using only US employees would retain much of the insight while cutting the heaviest administrative burden, since complexity scales dramatically with international operations. Within the US, data often resides in one or a handful of systems. Internationally, however, the number of systems can balloon into dozens, creating the steepest effort curve.

Taken together, these adjustments would provide meaningful relief to issuers while still honoring the statutory intent of the rule.

Wrap-Up

The SEC has some important decisions in front of it. There’s little debate over the need to improve the decision-usefulness of the proxy disclosure framework. The optimal outcome is one that provides material information to the reasonable investor without costing millions of dollars and hundreds (or more) hours of work.

The most fundamental fork in the road is a decision to blow up the entire proxy CD&A framework and start over, or make surgical (targeted) refinements around the edges. A full rewrite could be the highest impact, but it will take much longer and risk getting caught up in the courts if it clashes with existing statutory requirements. Surgical refinements are more accessible, but might be too little, too late.

We drafted our comment letter to the SEC in such a way as to be helpful on both paths. We suspect that targeted refinements will be more palatable because they can get drafted into a final rule sooner, and will also be less likely to be overturned by a new administration that has a different point of view on executive compensation disclosure and rule-making.

If you have ideas or areas of concern with regard to proxy content, please reach out and have a conversation with us. We look forward to representing these viewpoints in our formal and informal dialogue with regulators and other stakeholders.