SEC Proposes Limiting Executive Compensation Disclosures to CEO and CFO to Reduce Reporting Burdens

The US Securities and Exchange Commission has formally proposed a rule change that would eliminate the requirement for most public companies to disclose the compensation of their three highest-paid executives below the chief executive and chief financial officer. The draft framework, advanced in early November 2026, represents the most significant rollback of proxy reporting mandates in nearly two decades.[2][3]

Under current regulations established in 2006, publicly traded firms must publish detailed pay breakdowns for their top five officers, collectively known as Named Executive Officers. The new proposal would shrink that mandatory disclosure group to just two individuals for the majority of standard corporate filers.[4]

The regulatory shift targets the annual proxy statement, the document shareholders use to evaluate corporate governance before voting at annual meetings. By narrowing the scope, the commission aims to cut the legal and accounting hours required to produce these filings, which have grown increasingly complex over the past fifteen years.[1][5]

"This proposal recognizes that the compensation of the principal executive and financial officers provides the most critical signal of a company's pay philosophy," the SEC noted in its proposing release. The agency argued that the additional three executives often hold specialized or operational roles that do not reflect broader corporate strategy.[2]

Streamlining proxy season

The push for deregulation comes as corporate boards report mounting frustration with the sheer volume of mandatory disclosures. The average proxy statement length for an S&P 500 company has ballooned from 35 pages in 2005 to more than 90 pages in 2025, driven largely by intricate compensation tables.[4]

Equilar, a corporate leadership data firm, estimates that preparing the compensation discussion and analysis section consumes hundreds of internal hours per company each year. Stripping out the calculations for the third, fourth, and fifth highest-paid officers removes the need to track complex equity vesting schedules and pension value changes for those individuals.[4]

The proposed exemption would apply broadly, though it includes carve-outs for specific scenarios. If a company operates without a designated chief financial officer, the rules would require disclosure for the CEO and the next most highly compensated executive officer to ensure at least two data points remain public.

Cooley, a corporate law firm, highlighted in a November 13 client alert that the rollback would also simplify the calculation of the CEO pay ratio. Companies would no longer need to align the broader executive compensation pool with the median employee salary, removing a frequent source of friction during the drafting process.

Impact on talent benchmarking

The shift fundamentally alters how investors will benchmark executive talent across industries. Currently, compensation committees rely heavily on the public disclosures of peer companies to set competitive salaries for chief operating officers, general counsels, and heads of sales.[1][4]

Without mandatory public reporting for these secondary roles, human resources departments will lose a crucial dataset. Companies typically use the proxy filings of their direct competitors to ensure their compensation packages for executive vice presidents remain attractive enough to prevent poaching.[4][5]

"We are moving from a public data environment to a private survey model for anyone outside the top two spots," noted a compensation consultant cited by Briefs.co. This transition will likely force boards to purchase proprietary salary databases rather than pulling the numbers directly from free federal filings.[3]

The reduction in transparency also affects shareholder advisory firms like Institutional Shareholder Services and Glass Lewis. These organizations currently evaluate the entire top-five pay structure when recommending whether institutional investors should support or oppose a company's advisory say-on-pay vote.[2][5]

If the rule is finalized, advisory firms will have to base their governance ratings almost entirely on the CEO and CFO packages. Critics argue this could mask problematic incentive structures deeper within the executive ranks, particularly in sectors like banking where a head of trading might take massive risks to secure a bonus.[1][5]

The proposal does not strictly forbid companies from disclosing the pay of other executives. Firms that believe highlighting a broader leadership team benefits their shareholder narrative can voluntarily continue publishing the traditional five-person tables, though legal experts expect most will default to the minimum requirement.

The investor transparency debate

Institutional investors have historically guarded their access to executive pay data fiercely. During the public comment period, pension funds and asset managers are expected to push back against the reduction, arguing that visibility into the broader C-suite is essential for assessing succession planning.[2][3]

When a chief operating officer is paid significantly less than the chief executive, governance analysts often flag the disparity as a sign that the board has not developed a viable internal successor. Removing the COO's compensation from the public record eliminates that analytical tool entirely.[1][4]

Securities.io reported on November 13 that retail investor advocacy groups are already mobilizing against the draft rule. These organizations contend that shareholders have a fundamental right to know how corporate resources are distributed among the individuals managing the company's daily operations.[5]

"Shareholders are the owners of the company, and they are paying these salaries," one advocacy director stated. "Telling them they only get to see the receipts for two people, while the rest of the executive payroll goes dark, is a massive step backward for market transparency."[5]

Conversely, corporate trade associations have welcomed the proposal as a necessary correction to regulatory overreach. They argue that the current five-person rule frequently forces companies to disclose the pay of highly compensated salespeople or technical specialists who hold no actual policymaking authority.[2]

Implementation and next steps

The SEC's draft framework is now subject to a standard 60-day public comment period, which will close in mid-January 2027. Following the review of those submissions, the commission will draft a final rule, a process that typically takes an additional six to nine months.[2][3]

If the agency maintains its current timeline, the new disclosure thresholds could take effect for the 2028 proxy season. This timeline gives corporate legal departments and compensation committees a full year to adjust their drafting procedures and internal benchmarking strategies.

AI

The Journal of Accountancy noted that the proposal aligns with a broader agency effort to modernize the Regulation S-K disclosure requirements. The commission has spent the past three years attempting to weed out obsolete or duplicative reporting mandates that no longer serve a material purpose for modern investors.[2]

However, the specific targeting of executive compensation touches a political nerve that routine accounting updates do not. Executive pay has remained a highly scrutinized topic since the 2008 financial crisis, and any move to shield it from public view invites immediate legislative attention.[1][3]

Several lawmakers who sit on the Senate Banking Committee have already signaled their intent to question the SEC chair about the proposal during upcoming oversight hearings. They are expected to press the agency on whether the estimated cost savings for corporations justify the loss of data for the public markets.[1][5]

Until a final vote occurs, public companies must continue preparing their 2027 proxy statements under the existing five-person framework. Corporate secretaries and legal teams are currently gathering the necessary equity valuation and pension data for their broader executive teams as the spring annual meeting season approaches.[4]

Market reactions and alternatives

Some legal analysts suggest that the SEC might ultimately adopt a compromise position. One potential alternative floated in the proposing release would retain the five-person requirement for large-cap companies while granting the two-person exemption only to smaller reporting companies and emerging growth firms.[2]

Such a tiered approach would preserve transparency at the massive multinational corporations that dominate index funds, where executive compensation packages routinely exceed $20 million. It would simultaneously deliver the promised regulatory relief to mid-sized firms where compliance costs consume a larger percentage of revenue.[3]

The final shape of the rule will depend heavily on the empirical data submitted during the comment period. The SEC has explicitly asked corporate commenters to provide concrete dollar estimates of the legal and accounting savings they would realize if the disclosure group were reduced.[2]