CHANGES TO THE SUMMARY COMPENSATION TABLE (“SCT”)
The final regulations provide a new methodology for reporting the value of equity grants. The SEC is directing employers to report the aggregate grant date fair value of equity awards on the SCT. Prior practice was to report the amount of the financial statement expense related to grants to named executive officers (“NEOs”) and directors. The new practice is believed by many to provide a more accurate view of the reward that an NEO received for work performed in the year relating to the filing.
Companies that award performance-based equity will need to make an estimate of the likelihood of satisfaction of the performance condition, and note the entire value of the grant in a footnote.
For comparison purposes, the grants to all of the current year NEOs/directors who were NEOs/directors in prior years will need to be restated; however, the identities of NEOs will not change as a result of the restatement.
We do not believe that this will be a difficult change for filers to implement.