SEC Chair Atkins calls for simplifying exec comp reporting

Paul Atkins is ready to cut back executive compensation disclosures.

During February’s Texas A&M School of Law Corporate Law Symposium, the SEC chair’s remarks suggested that the agency was homing in on changes to Item 402 of Regulation S-K. Atkins reiterated his view that executive compensation disclosures have become costly and burdensome to prepare, and that they’re bloated with information that’s not valuable to investors. He called for “rationalizing, simplifying, and modernizing” Item 402 with “materiality as their North Star.”

But Atkins also singled out specific areas of Item 402—particularly pay-versus-performance disclosures and the treatment of security for executives as a perk—signaling they may become points of focus for the SEC in months to come.

TL;DR. Many businesses and attorneys would welcome more streamlined exec comp disclosures, Julia Petty, a partner at law firm Cleary Gottlieb who specializes in executive compensation and benefits, told CFO Brew. “There is a hunger for simplicity in this area across the board,” she said.

Changes to Item 402 would likely save companies time and money, she said, because the disclosures “take a lot of human power, both internally and externally” and “go through a lot of legal review” to compile.

But whether the resulting information is useful to investors is another story. Institutional investors and proxy advisors study disclosures carefully, Jeffrey Aromatorio, a partner at law firm Reed Smith who focuses on executive compensation and corporate governance, told CFO Brew, but the tables might be too complex for individual investors to parse.

Disclosure filings have gotten so lengthy, Petty said, that many investors have started using AI to sort through them. Through her conversations with executives and IR personnel, she’s learned that “a lot of the bloat is intentionally bypassed” with AI “in order to enable investors to process and analyze and react to more proxies.”

When changes might come. It’s hard to guess when any changes to the rule could take place. The SEC does have an item recommending proposed “rule amendments to rationalize disclosure practices to facilitate material disclosure by companies and shareholders’ access to that information” on its agenda for this spring, but it doesn’t specifically mention executive compensation. Crescent Moran Chasteen, a partner in the Morrison & Foerster law firm, predicted that the SEC will propose reforms this year, and compensation advisory firm Equity Methods suggests that a final rule could come “in early 2027,” affecting 2028 and possibly 2027 proxies.

How CFOs can prepare. In light of that uncertainty, what should CFOs do to prepare? “Wait and see has value here,” Petty said. She suggests that CFOs not prematurely bank on any cost savings from revised disclosure rules. “If they are streamlined, there will be real financial savings within a limited period of time, because there will be reduced complexity, but we don’t know when that’s going to happen,” she said.

Given the SEC’s emphasis on materiality, Aromatorio recommends that CFOs and general counsel review the compensation discussion and analysis (CD&A) sections of their current disclosures through a “principles-based” lens. “Sometimes that’s missed, the ‘why,’” he said. “Why did the executives earn the amounts they earned? How are the decisions aligned with the strategy? Crystallize that disclosure with materiality front of mind.”

“It’s really mission-critical,” he said, “that a company’s compensation philosophy is evidenced through their disclosures.” With that in mind, he suggests that CFOs and legal teams “strengthen the disclosure knowledge base” within their companies, ensuring that stakeholders such as compensation committees “are fully apprised of executive or expected disclosures prior to charting a course” and that they think through how different types of compensation might appear on a proxy statement.

2026 is “an exciting time for compensation disclosure,” Petty said. But many advisors and attorneys who work on compensation, she admitted, doubt whether all the time they dedicate to preparing disclosures is well-spent. “And I say this as someone who objectively drafts it for a living.”