Disclosure Presentation: Key Highlights

Registrants are required to disclose executive compensation “actually paid” to named executive officers (NEOs),¹ as well as the following financial performance measures:

• Cumulative total shareholder return (TSR) for the registrant
• Weighted TSR² for the registrant’s chosen peer group
• Net income for the registrant
• Measure used by the registrant to measure financial performance (Company-Selected Measure)

The disclosures are required in tabular format, as follows:

Pay versus Performance

^{*SRCs may omit this disclosure.}

(a) If a registrant changes its fiscal year, disclosures should be provided for the “stub period” in the year of change (i.e., the period between the last fiscal year end and the new fiscal year end). Refer to C&DI 228D.01 for an example.

(b) Executive compensation “actually paid” during a year is the “Total” column in the Summary Compensation Table (SCT) required by Item 402(c) of Regulation S-K, adjusted for certain amounts related to equity-based compensation and defined benefit and actuarial pension plans discussed further below. If the registrant had multiple PEOs in a fiscal year, the compensation actually paid to the PEOs may be aggregated for disclosure if the presentation is not misleading to investors.

(c) Item 201(e) of Regulation S-K defines TSR as dividends plus or minus the change in share price over the measurement period.

(d) The peer group may be either the peer group used for disclosures required under S-K Item 201(e), or a peer group used in Compensation Discussion and Analysis (CD&A) even if such peer group is not used for “benchmarking” purposes. The peer group must be disclosed in a footnote if it is not a published industry or line-of-business index, though registrants that have disclosed the peer group in prior filings may incorporate those filings rather than repeat the disclosure. The peer group is determined each fiscal year; if a registrant changes the peer group in its CD&A, the most recent peer group should not be used to calculate peer group TSR for all years disclosed in the table. Rather, the registrant should calculate peer group TSR based on the specific peer groups disclosed for each individual year along with a footnote to disclose the reason for the change. 

(e) If a registrant went public during the earliest year presented in the table (and registered a class of securities pursuant to Section 12 of the Exchange Act), the “measurement point” for purposes of calculating TSR and peer group TSR should begin on the registration date. If a registrant has emerged from bankruptcy and issued a new class of stock pursuant to the bankruptcy plan, it may provide its cumulative TSR and peer group TSR using a measurement period that begins on the date the new class of stock began trading.

(f) Net income (loss) must agree to net income or loss reported in the audited financial statements. Registrants may not use adjusted net income or loss amounts.

(g) The Company-Selected Measure:

• May be any financial performance measure that differs from the financial performance measures otherwise required to be disclosed in the table, which includes measures derived from the registrant’s net income or TSR (e.g., it is acceptable to use earnings per share, gross profit, or relative TSR as the Company-Selected Measure). 
• May not be the registrant’s stock price if the registrant does not use the stock price to link compensation actually paid to company performance. 
• May not be omitted even if the registrant uses a “pool plan” to determine its annual bonus awards,³ and cannot be measured over a multi-year period. 

If a registrant does not use any financial performance measures to link executive compensation actually paid to performance, or if it only uses a financial measure required by S-K Item 402(v), the registrant is not required to disclose a Company-Selected Measure. 

In addition to the Company-Selected Measure, registrants are required to include a tabular list of three to seven financial performance measures that they believe are “most important” to link executive compensation actually paid to the performance of the company for the most recently completed fiscal year. The Company-Selected Measure must be selected from this list and the “most important” determination should be made considering only the most recently completed fiscal year. A registrant is not required to disclose its method for determining the “most important” measures but should consider whether it would be helpful to an understanding of the measure. If the registrant uses fewer than three measures, the tabular list must include all measures used. If the registrant considers a non-financial measure to be one of the “most important” measures, the rule permits, but does not require, it to be included in the tabular list.

The registrant may present the tabular list as any of the following:

• A single list for all NEOs 
• Separate lists, one for the PEO and one for all other NEOs
• Separate lists for the PEO and each NEO

The list does not require the registrant to rank the importance of each measure. SRCs may omit these disclosures.

Registrants must clearly describe the relationship between the financial performance measures and the compensation actually paid to the registrant’s NEOs. The disclosures may be presented narratively, graphically, or a combination of the two, and must describe the relationship between the following:

• Executive compensation actually paid and registrant’s TSR, net income, and company-selected measure
• Registrant’s TSR and peer group TSR

^{1  Persons covered under the NEOs are specified in Item 402(a)(3) of Regulation S-K and listed in the SCT.}

^{2  Weighted based on the stock market capitalization of each respective peer at the beginning of each period for which the return is disclosed.}

^{3  Similarly, a registrant may not omit the tabular list of financial measures that are most important to the registrant or the related relationship disclosures.}

^{4  A decrease in the actuarial present value from the prior fiscal year is excluded from the calculation in the SCT and is therefore excluded from the determination of compensation actually paid.}

^{5 Under ASC Topic 718, Compensation – Stock Compensation, a market condition is not a vesting condition. As such, the determination of when an award containing a market condition vests for disclosure purposes is not consistent with U.S. GAAP.}