The backgrounds of the webpages are based on actual assignments, research and other thoughts. Read on if you want to know a little more. -- Andy

Knowledge and Research Background

I remember getting a text about 10:15 PM on August 25, 2022 about the SEC's final pay versus performance rules that came out that day. I was on vacation in the Florida Keys and was settling down from a long day of boating and diving. The text was from a friend and colleague telling me that the SEC took my suggestion to use "incremental compensation earned" as the approach for calculating "executive compensation actually paid" which the SEC mentioned in its original proposing release in 2015. I didn't respond until about 1:00 PM the next day to say that this was the furthest thing from my mind.

Only two commenters suggested this approach - I suggested it back in 2015 and again in 2022 (the background to this page is part of the 2022 letter), the other commenter (the friend and colleague I mentioned above) "borrowed" heavily from my comment letters (see footnote 208 on the bottom of page 56 of the final rules). So I accept full credit or blame, depending on how you look at it.

Actually, as I mentioned above, it wasn't really just my idea, it was proposed by the SEC in 2015 and was consistent with much of what I was thinking: look at changes in paper gains over each year (like annual change in assets on a balance sheet or someone's checking account balance). The SEC's 2015 proposing release had this approach hidden in the Economic Analysis section - I'm guessing that not too many people actually read this section.

Most other consulting firms really hated this approach when the final rules were first released. Perhaps this was because they were attempting to sell their versions of pay versus performance analyses including different versions of "realizable pay" or "performance-adjusted compensation." Since the final rules were released, a number of consulting firms seem to have embraced it as a good way to look at pay and performance.