Summary Compensation Table - Explained
What is a Summary Compensation Table?
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Table of ContentsWhat is a Summary Compensation Table?How is a Summary Compensation Table Used? Academic Research on Summary Compensation Table
What is a Summary Compensation Table?
The Summary Compensation Table gives an annotation of the compensation that the executives of a company receive.
The Summary Compensation Table contains the total amount a company spends on executive compensation, the itemization of the compensation among other relevant information.
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How is a Summary Compensation Table Used?
Following the debates on executive compensation in the corporate sector, the Securities Exchange Commission (SEC) rules mandates every company to disclose the total amount spent on executive compensation for a fiscal year. This disclosure is presented on the Summary Compensation Table.
The table does not only contain the total compensation paid to the company's executives, it contains the input of shareholders on the compensation. This table allows SEC determine whether a company has complied to its rules and corporate laws on executive compensation.
So as not to fall under the wrath of SEC and corporate law, most companies employ the services of securities lawyer in order to comply with the rules and keep them up-to-date. Say-on-Pay is a role in corporate law that allows the shareholders of a company to make inputs or have a say on the compensation of executives.
Say-on-pay rule was imposed by SEC to regulate executive compensation by empowering shareholders to actively vote on how much the executives of a company should be compensated. This rule mandates companies to disclose executive compensation to shareholders and allow them vote on it before it is implemented. This rule has however resulted in arguments. While some people see it as an avenue for shareholders to perform their fiduciary duty, other critics see it as a policy that does not effectively regulate executive compensation.
The SEC issued the Pay Ratio Disclosure Rule which mandates companies to disclose mow more executives are paid when compared to other employees. This rule states that a company should disclose the ratio or difference between the CEOs compensation and the employees median compensation. This rule is SECs compliance with Section 953(b) of the Dodd-Frank Wall Street Reform and the Consumer Protection Act which takes effect by the end of 2017 fiscal year.
Some critics see this as a controversial rule that requires companies to disclose the CEOs annual compensation and the total annual compensation of the median employee of same organization. The ratio between the two is also to be disclosed.
Pay-for-Performance Disclosure Rule is part of the SEC proposed rules in August 2015, it is as a result of the compliance of SEC with the Dodd-Frank Pay for Performance Requirements. This rule aims to establish the connection between executive compensation and the performances of the executives. This rule requires that public companies reveal the total shareholders return of a company as well as that of other peer companies. It also requires that companies disclose the actual pays of their principal executive officers and the average actual pay of other officers such as the CEO and CMO.
SEC is quite clear on companies that are expected to disclose their executive compensation at the end of every fiscal year. The specifics of what should be disclosed are also given by SEC. All companies are not expected to disclose executive compensation at the end of every fiscal year. New or emerging companies, foreign private issuers and small corporations are excluded from disclosing executive compensation while others are mandated to.
This disclosure of executive compensation also applies to most stock issuing companies and any company listed on a public exchange or issuing securities that are regulated by SEC. Quite a number of companies hire corporate securities lawyer who ensure that they comply with SEC rules and corporate laws. Priori helps companies with the right corporate securities lawyer keep them updates about current rules and also help them comply with existing rules. Priori securities lawyers have an hourly rate, their pricing ranges from $225 per hour to $450 per hour. The pricing information of Priori are often disclosed before deals are made, discounted rates, free complimentary consultation can also be negotiated with Priori securities lawyers.
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