Policy and Legal

The Securities and Exchange Commission’s executive compensation reporting requirements are needlessly complex and costly for manufacturers—and reforming them would be a boon to the industry, the NAM told the SEC this week.

What’s going on: The NAM laid out a series of recommendations for making the reporting requirements more workable for publicly traded companies while still providing investors with useful, material information.

• “Neither Main Street investors nor companies are well served by rules that have directed issuers to provide an expanding array of footnoted tables, retain outside consultants to perform ‘compensation actually paid’ calculations that often are confusing to investors, and churn out pay-related disclosures that often exceed 20 or 30 pages,” the NAM told the SEC.
• This week’s suggestions build on ones the NAM made in June.

What should be done: The SEC can benefit both manufacturers and investors by taking several specific steps, the NAM said, including:

• Replacing unduly burdensome mandates with “principles-based disclosure designed for the reasonable investor”;
• Simplifying the 2022 “pay versus performance” rule;
• Giving meaningful disclosure relief to smaller firms;
• Addressing the outsized impact that proxy advisory firms have on compensation decisions;
• Updating perk disclosure rules to reflect changes since 2006, including by ensuring company executives can access needed security protections; and
• Suspending enforcement of the 2022 “clawback” rule until the rule is made less burdensome to companies.

The final word: By making these changes to its executive compensation reporting requirements, the SEC “can ensure manufacturers can recruit and retain leaders that will grow the business, create more jobs and contribute to our overall economic growth,” said NAM Managing Vice President of Policy Charles Crain.