WTW’s “Early trends in pay versus performance disclosures” reveals the results of its analysis of Pay Versus Performance disclosures included in SEC filings as of March 10. Of the 161 companies, two were voluntary filers and seven were SRCs, whose data is included in the results except in those cases where SRCs are exempted from particular disclosure requirements.
Among the key takeaways:
Comparator group for TSR—Most companies (75%) used an industry or line-of-business index (typically the same index used for the Form 10-K Stock Performance Graph), rather than a custom benchmarking peer group for TSR calculations.
Company-selected measure—Company-selected financial measures (used by nearly all companies) consisting of profit or income measures were the most prevalent (~60% of filings)—most commonly EPS-based measures, followed by other earnings measures such as EBITDA and EBIT.
Tabular list of most important measures—Most companies (94%) disclosed one tabular list of the “most important” financial performance measures (multiple lists are permitted), and 80% disclosed only financial measures, with three tabular measures being the most common.
Explanation of relationships between compensation and performance—More than 80% of companies used graphs rather than just a narrative to describe the relationship between Compensation Actually Paid and the company’s financial performance.
Location of disclosure—The vast majority of companies included their PVP disclosure alongside the CEO pay ratio. CD&A disclosure, if any, has consisted of merely referencing the PVP disclosure located outside the CD&A.
The post also addresses Compensation Actually Paid values (which, as memorably explained in this Fortune CEO Daily article, are not, in fact, compensation actually paid) relative to SCT pay over the past three years.