The Securities and Exchange Commission (SEC) on Thursday reopened the comment period for its pay versus performance rule, a long-dormant provision contained in the Dodd-Frank Act that was never implemented.

The proposed rule would require public companies to disclose information “reflecting the relationship between executive compensation actually paid by a company and the company’s financial performance,” according to an agency press release.

The rule has been dormant since 2015, the last time the SEC opened a comment period on it. It is one of 11 mandates of Dodd-Frank the agency has yet to implement. SEC Chair Gary Gensler has publicly committed to seeing through these outstanding rules, just as he did when he was chair of the Commodity Futures Trading Commission from 2009-14.

The pay versus performance rule would require public companies to track the pay of their principal executive officer (PEO), principal financial officer (PFO), and the “three most highly compensated executive officers other than the PEO and PFO who were serving as executive officers at the end of the last completed fiscal year.” Should up to two of these officers leave in the middle of a fiscal year, their compensation would also be required to be tracked to comply with the rule. Collectively, these executives would be named executive officers (NEOs).

The pay versus performance disclosure would provide the actual compensation paid to the PEO and an average compensation for the remaining NEOs.

Smaller reporting companies, defined as having less than $250 million in publicly held shares or less than $100 million in annual revenue, would be exempt from compliance with the rule.

In the original rule as proposed in 2015, these compensation amounts would then be compared with the company’s total shareholder return. Total shareholder return is calculated by “dividing the sum of the cumulative amount of dividends for the measurement period, assuming dividend reinvestment, and the difference between the registrant’s share price at the end and the beginning of the measurement period; by the share price at the beginning of the measurement period,” the rule said.

Providing those figures would fulfill the tabular requirement of the rule; companies would also have to explain their executive compensation policies as they relate to total shareholder return in narrative form as well.

“If adopted, this proposed rule would strengthen the transparency and quality of executive compensation disclosure” and “… would provide shareholders with information they need to evaluate a company’s executive compensation policies,” said Gensler in the press release.

As part of the comment period, the SEC is asking the public to offer opinions on several potential changes to the original rule, including:

  • Whether registrants should be required to disclose additional performance measures beyond total shareholder return;
  • Whether, if required, pre-tax net income and net income would be useful additional financial measures;
  • Whether registrants should be required to disclose what they believe is the measure that represents the most important performance measure used to link compensation actually paid during the fiscal year to company performance; and
  • Whether registrants should also be required to disclose a tabular list of their five most important performance measures used to determine compensation actually paid.

The comment period will be open 30 days, starting with publication of the release in the Federal Register.

The SEC in October similarly reopened the comment period for another executive compensation rule from Dodd-Frank, one that would require public companies to claw back incentive-based compensation if their finances are restated within the previous three years. The comment period ended without the agency announcing an extension or final rule.