Pay versus performance disclosure explained
Pay versus performance disclosure is the table that US registrants must put in their proxy and information statements showing what their executives were actually paid alongside how the company actually performed. It lives in Item 402(v) of Regulation S-K, the SEC adopted it in August 2022 under Section 953(a) of the Dodd-Frank Act, and it first applied to fiscal years ending on or after 16 December 2022. This guide explains what pay versus performance disclosure contains, how the pay number is built, and how to read it. It is not investment advice.
Definition
Pay versus performance disclosure
is the SEC table required by Item 402(v) of Regulation S-K in proxy and information statements. It sets compensation actually paid to the principal executive officer and the average for other named executive officers against company and peer total shareholder return, net income, and a company-selected measure. Source: SEC.
What is in the pay versus performance table?
For each covered year the table reports a fixed set of columns:
| Column | What it shows |
|---|---|
| Summary compensation table total, PEO | The headline pay figure for the principal executive officer |
| Compensation actually paid, PEO | The same pay recalculated onto a fair-value basis |
| Average summary compensation table total, other NEOs | The headline figure averaged across the other named executive officers |
| Average compensation actually paid, other NEOs | The recalculated figure for that same group |
| Company total shareholder return | Cumulative TSR for the registrant |
| Peer group total shareholder return | Cumulative TSR for the chosen peer group |
| Net income | The registrant's net income |
| Company-selected measure | One further financial measure the registrant judges most important to linking pay to performance |
Registrants also give a tabular list of the financial performance measures they consider most important in that linkage, at least three and no more than seven, or all of them where the registrant uses fewer than three. Alongside it comes a narrative or graphical description of the relationships the table shows.
What does "compensation actually paid" mean?
This is the column people misread most often. Compensation actually paid, usually shortened to CAP, is not cash received. It starts from the Summary Compensation Table total and then adjusts the pension and equity components onto a fair-value basis, including the year-over-year change in fair value of awards that have not vested. Because so much executive pay is equity, CAP moves with the share price, and in a year when the stock falls, CAP can come out well below the headline number or even negative. That mechanical link is the point of the disclosure, not a judgment about the executive.
5 fiscal years
Years the pay versus performance table ultimately covers, phased in from three; smaller reporting companies present three
Source: SEC, Item 402(v) of Regulation S-K
Who has to provide it?
The requirement applies to registrants filing proxy and information statements with executive compensation disclosure. Smaller reporting companies give a scaled version: three years rather than five, no peer group total shareholder return, no company-selected measure, and no tabular list of measures. Emerging growth companies, registered investment companies and foreign private issuers are outside the requirement entirely, which is why you will not find this table in a 20-F.
How to read it without over-reading it
The table is a record of two series placed side by side. It does not claim that one caused the other, and a single year of divergence between CAP and TSR is often just the equity mark moving. The useful reading is the multi-year shape, checked against the rest of the pay file: the proxy statement narrative, the advisory say-on-pay vote that shareholders cast on the same package, the clawback policy that would claw pay back after a restatement, and, in a deal, the golden parachute figures. How large fund managers voted on those pay resolutions shows up separately in Form N-PX.
Pay versus performance disclosure is public on the SEC's EDGAR system, which you can search for free. Flock reads disclosure filings and keeps each one dated and linked to its source. What any of it means for your money is your call to make.
Frequently asked questions
What is pay versus performance disclosure?
Pay versus performance disclosure is the table US registrants must include in proxy and information statements under Item 402(v) of Regulation S-K. It sets compensation actually paid to named executive officers against total shareholder return, net income and a company-selected measure, year by year. Source: SEC.
What is compensation actually paid?
Compensation actually paid, or CAP, is a calculated figure. It starts from the Summary Compensation Table total and adjusts the pension and equity award components onto a fair-value basis, including the change in value of awards that are still unvested. It is not cash the executive banked that year. Source: SEC, Item 402(v).
How many years does the table cover?
The table ultimately covers the five most recently completed fiscal years. It was phased in, starting at three years and adding one year in each of the next two filings. Smaller reporting companies present three years, phased in from two. Source: SEC.
Which companies do not have to provide it?
Emerging growth companies, registered investment companies and foreign private issuers are outside the requirement. Smaller reporting companies provide a scaled version without peer group total shareholder return or a company-selected measure. Source: SEC.
Flock tracks these filings, sourced, dated, and linked back to the original. See what smart-money entities disclosed, without the guesswork about what it means.
Disclosures shown are public regulatory filings. Data may be delayed or incomplete. Smart-money entities may no longer hold positions shown. Not investment advice.