New Pay Governance Study Provisionally Concludes SEC's New PVP Disclosure Improves Shareholders' Ability to Assess Pay-for-Performance Alignment

(Graphic: Business Wire)

NEW YORK--()--The SEC released its final version of the rules mandated by Dodd-Frank regarding the disclosure of pay versus performance (PVP) last year. Since then, thousands of calendar-year U.S. companies have been working diligently to prepare the required information for their 2023 proxies. This includes compensation actually paid (CAP), a new definition of compensation intended to demonstrate the potential value of total pay that has been or may be received by proxy-named executive officers.

Does the SEC's new PVP disclosure improve shareholders' ability to assess pay-for-performance alignment? An in-depth study by Pay Governance LLC, a premiere board-level executive compensation advisor that advises the boards of many prominent publicly traded companies, concludes that it does, and provides additional insights, as well.

Given the significant use of stock incentives at virtually all publicly traded companies, it was expected that the new PVP disclosure requirement would demonstrate some degree of pay-for-performance alignment. What was unknown was just how strong the alignment might be and if the new disclosure would truly assist shareholders in understanding the relationship of a company’s pay and performance.

“The new PVP disclosure would appear to support shareholders’ consistent strong support for Say on Pay over the past 12 years,” said Pay Governance Managing Partner and study co-author Ira Kay.

The Pay Governance analytical study initially used the PVP disclosure of 50 S&P 500 companies that filed their proxies on or before March 10, based on data collected by ESGAUGE, then expanded it to 102 S&P 500 companies that filed their proxies as of March 16. A strong relationship of pay and performance was initially observed and continued with the larger sample size.

“We developed a comprehensive methodology to assess the degree of alignment,” said Partner and study co-author Mike Kesner.

The PVP data was used to calculate the direction of alignment based on the year-over-year (YOY) change in CAP compared to the YOY change in total shareholder return (TSR).

Ed Sim, Senior Consultant and study co-author, explained that the following taxonomy was used to categorize each data point:

  1. “Positive Alignment” - where the changes for both YOY CAP and YOY TSR are positive.
  2. “Negative Alignment” - where the changes for both YOY CAP and YOY TSR are negative.
  3. “Not Aligned, but Positive” - where change in YOY CAP is negative and change in YOY TSR is positive.
  4. “Not Aligned, and Negative” - where change in YOY CAP is positive and change in YOY TSR is negative.

The table above shows the relationship between changes in CAP and TSR, including:

  • 84% of companies in the analysis demonstrated directional alignment of change in CAP and cumulative TSR—48% positive and 35% negative alignment.
  • 13% of companies in the sample had a negative change in CAP and positive change in cumulative TSR. The remaining 4% of companies in the sample had positive changes in CAP and negative changes in TSR.

The dot plot chart image available with this press release illustrates the individual company YOY comparison points for CAP and TSR.

“While it may be too early to draw definitive conclusions given the relatively small sample size, our findings are encouraging,” said Linda Pappas, Principal and study co-author.

These changes in CEO CAP show alignment to changes in company TSR, which is what shareholders expect due to the large weight placed on equity-based compensation.

Pay Governance LLC is an independent consulting firm focused on delivering advisory services to compensation committees. The consultancy also advises the management of companies in situations in which the firm does not serve as the independent committee advisor. Pay Governance has locations throughout the United States in New York, Boston, Detroit, Philadelphia, Pittsburgh, Atlanta, Chicago, Dallas, Cleveland, St. Petersburg, San Francisco and Los Angeles. The firm also has strategic affiliate relationships with Pay Governance Japan and Pay Governance Korea. For more information, visit


Rountree Group
Lisa Hester

Release Summary

New Pay Governance study provisionally concludes SEC's new PVP disclosure improves shareholders' ability to assess pay-for-performance alignment.


Rountree Group
Lisa Hester