SEC Proposes Massive Rollback of Executive Pay Disclosure, Exempting 81% of Public Companies

The US Securities and Exchange Commission (SEC) has unveiled a sweeping proposal that would fundamentally rewrite the rules of executive compensation disclosure, representing the most significant overhaul of the public company reporting framework in two decades.[2][3]

At the heart of the proposal is a massive deregulation effort aimed at reducing the compliance burden on the vast majority of publicly traded companies. By simplifying the classification system for public filers, the SEC intends to exempt thousands of businesses from some of the most scrutinized requirements of the post-Dodd-Frank era.[2]

If adopted, the new rules would eliminate the mandatory "Say-on-Pay" shareholder votes and the detailed Compensation Discussion and Analysis (CD&A) narratives for an estimated 81% of all public companies.[1]

To understand the magnitude of this shift, one must look at the current regulatory landscape. Today, the SEC categorizes companies into a complex five-tier system, with different disclosure rules applying to Emerging Growth Companies (EGCs), Smaller Reporting Companies (SRCs), and various sizes of accelerated filers.

The SEC's May 2026 proposal collapses this intricate web into a straightforward two-tier system: Large Accelerated Filers (LAFs) and Non-Accelerated Filers (NAFs).

The threshold to become a Large Accelerated Filer would nearly triple under the new framework. Currently, companies with a public float of $700 million face the strictest reporting requirements. The proposal raises that bar to a towering $2 billion.[1]

Furthermore, a company would need to maintain that $2 billion public float for two consecutive fiscal years and have a 60-month track record of Exchange Act reporting before graduating to LAF status.[1]

This means that every newly public company, regardless of its initial valuation or market capitalization, would enjoy a guaranteed five-year "on-ramp" as a Non-Accelerated Filer, shielding them from the heaviest regulatory burdens during their critical early years on the market.

For the 81% of companies that would fall into the NAF category, the relief from executive compensation disclosures is comprehensive. The most high-profile exemption is the elimination of the Say-on-Pay vote.[1]

Instituted following the 2008 financial crisis, Say-on-Pay requires companies to hold a non-binding shareholder advisory vote on the compensation packages of their top executives at least once every three years. NAFs would no longer be required to hold these votes, nor would they need to hold votes on the frequency of Say-on-Pay.[2]

Equally significant is the proposed elimination of the Compensation Discussion and Analysis (CD&A) section. The CD&A is a notoriously lengthy and complex narrative in a company's proxy statement that explains the philosophy, metrics, and rationale behind how the CEO and other top executives are paid.[1]

Without the CD&A, NAFs would only need to provide scaled-down compensation tables for their top three executives, rather than the top five. They would no longer have to justify the underlying philosophy behind the paychecks, only report the final numbers.[1]

The rollback extends further into the weeds of proxy disclosures. NAFs would be exempt from providing the recently implemented "Pay-Versus-Performance" tables, which require companies to map executive compensation against total shareholder return and other financial metrics.[1]

They would also be freed from holding "Say-on-Golden-Parachute" votes, which allow shareholders to weigh in on lucrative severance packages triggered by mergers and acquisitions.

Proponents of the rollback, including the National Association of Manufacturers and various corporate advocacy groups, have long argued that the current disclosure regime is a costly, one-size-fits-all burden that disproportionately harms smaller and mid-cap companies.

They contend that the intense compliance costs—often requiring expensive outside compensation consultants and legal counsel—divert resources away from business growth. Furthermore, critics of the current system argue that Say-on-Pay votes have largely been captured by proxy advisory firms, turning them into automated compliance exercises rather than meaningful shareholder engagements.[3]

By extending the exemptions currently enjoyed only by Emerging Growth Companies to a much wider swath of the market, the SEC hopes to make the public markets more attractive, potentially reversing the long-term decline in domestic initial public offerings.[2][3]

However, the proposal represents a profound loss of visibility for investors. Shareholder rights advocates warn that exempting four out of five public companies from Say-on-Pay removes a vital mechanism for holding boards accountable for excessive executive compensation.[3]

Without the CD&A narrative, investors will have little insight into whether a CEO's bonus is tied to rigorous performance metrics or simply handed out as a retention tool. The lack of Pay-Versus-Performance data will also make it harder for shareholders to evaluate whether management's interests are truly aligned with their own.[3]

The SEC is currently accepting public comments on the proposal. If finalized in its current form by late 2026, the new two-tier framework and its sweeping exemptions would take effect for the 2027 proxy season, fundamentally reshaping the dialogue between corporate America and its shareholders.[1]