SEC proposes materiality-based executive pay disclosures

The SEC proposed amendments on Nov. 13 to make executive and director compensation disclosures more principles-based and driven by materiality. The proposal would change Item 402 of Regulation S-K, the compensation disclosure rules used by registrants.

Fewer mandatory fields could produce more company-specific reporting on executive incentives, while also making investor due diligence less standardized. The SEC says the amendments would refocus filings on material information, improve tracking of equity awards through their lifecycle and reduce compliance work where investors receive no commensurate benefit.

SEC Chairman Paul S. Atkins described the plan as part of an effort to move the public-company disclosure regime toward materiality. “Today, the Commission proposed amendments to its executive compensation disclosure requirements contained in Item 402 of Regulation S-K. These amendments reflect a comprehensive reform of Item 402 that, together with other previously proposed actions, are central tenets of my agenda and focus on transforming the SEC’s public company disclosure regime to one rooted in materiality,” Atkins said.

The proposal would redefine the named executive officer population to include the principal executive officer and principal financial officer. That would reduce the required group from typically five or more officers to two.

That count matters for anyone comparing leadership exposure across listed crypto companies. A filing centered on two officers could contain less mandatory information about other senior executives, even as the SEC’s stated aim is to direct attention toward compensation it considers material. The proposal would allow registrants to tailor disclosure for greater transparency and efficiency.

The current primary executive-compensation tables would be replaced with three new tables: an Earned Compensation Table, a Granted Compensation Table and a Status of Equity Awards Table. Each would come with narratives. The structure is designed to help investors follow awards from grant through later status, a relevant distinction for companies whose leadership compensation includes equity.

The perquisite threshold would also move sharply. The minimum aggregate reporting threshold would rise from $10,000 to $150,000. That is a 15-times increase: $150,000 ÷ $10,000 = 15. The change would mean smaller aggregate perquisites would fall outside the proposed reporting threshold.

The Compensation Discussion and Analysis requirement would be pared back to three required topics. The proposal would eliminate the existing list of 15 example topics, making the section more principles-based. For investors, the consequence is a greater need to read each registrant’s narrative on its own terms rather than expect the same checklist across filings.

Pay-versus-performance disclosures would also change. The SEC would reduce the required performance measures and replace the “Compensation Actually Paid” calculation with the total compensation earned amount from the proposed Earned Compensation Table.

The pay-ratio rule would use only U.S. full-time employees in determining the median employee, and registrants would need to make that determination every five years rather than at the current frequency. The proposal would also eliminate required cover-page check boxes in annual reports and certain potentially redundant clawback-policy disclosures.

Atkins said the SEC’s July 2025 executive-compensation roundtable generated more than 80 comment letters from investors, companies and advisors. In a separate SEC statement, he compared the current rules to an “ice cream parlor that carries rum raisin and maple walnut; flavors desired by only a single customer.”

The agency last comprehensively reviewed Item 402 in 2006. The 2026 proposal therefore arrives 20 years after that review: 2026 − 2006 = 20. The SEC’s July 2025 consultation preceded the amendments, which the agency says reflect that input.

The consequence for affected registrants is procedural and immediate: the proposal is open for public comment for 60 days after publication in the Federal Register.