The Securities and Exchange Commission’s (SEC) recent proposal to significantly alter public company financial disclosure requirements, particularly concerning executive compensation, is encountering considerable pushback from a substantial segment of institutional investors. While the SEC aims to reduce compliance burdens and encourage greater public market participation, a comprehensive survey reveals that many large investors believe these proposed changes would diminish transparency and are largely opposed to reducing disclosure mandates based on company size. This sentiment, detailed in a recent Pay Governance memorandum authored by Partners Linda Pappas, Mike Kesner, and Lane Ringlee, suggests a potential divergence between regulatory intent and investor expectations.
Background: The SEC’s Drive for Simplification
In early 2026, the SEC put forth a series of proposed rule changes designed to streamline financial disclosures for public companies. A core objective of this initiative, as stated by SEC officials, is to lower compliance costs for businesses and simplify reporting obligations, thereby fostering an environment more conducive to initial public offerings (IPOs) and sustained public market presence. The initial focus of these proposed changes was on "Non-Accelerated Filers" – companies with a public float of less than $2 billion. For these entities, the SEC suggested significant reductions in executive compensation disclosure requirements.
However, the scope of these proposed reforms appears broader than initially presented. SEC Chairman Atkins, in his public statements, characterized the proposal for Non-Accelerated Filers as "among the first steps toward transforming the SEC’s regulatory framework." This signaled an intention to eventually address disclosure requirements for larger public companies as well. Indeed, further proposed changes impacting "Large Accelerated Filers" (LAFs) – companies with a public float exceeding $2 billion – were submitted by the SEC to the Office of Information and Regulatory Affairs (OIRA) on August 26, 2026, and were pending review as of the date of the Pay Governance analysis. Market observers and commentators have widely speculated that these forthcoming changes for LAFs will likely include simplifications to the pay-versus-performance (PVP) and CEO pay ratio disclosures, alongside revisions to perquisite disclosure rules.
The rationale behind these proposed simplifications, particularly for smaller public companies, stems from the perceived burden of extensive disclosure mandates. Proponents argue that the costs associated with gathering, preparing, and filing detailed compensation information can be disproportionately high for smaller entities, potentially deterring them from going public or encouraging them to delist. The SEC’s initiative aligns with a broader regulatory trend aimed at reducing the compliance overhead for businesses.
Investor Survey Reveals Widespread Opposition
In anticipation of these potential regulatory shifts, Pay Governance, in collaboration with Governance Intelligence, a prominent provider of governance research solutions, conducted a significant survey of institutional investors during the summer of 2026. The survey drew participation from 83 institutional investors, collectively managing assets totaling $47 trillion. These investors represented a diverse global base, with participants from North America, Europe, and Asia.
The findings of this survey present a stark contrast to the SEC’s stated goals for simplifying disclosure. A prevailing sentiment among the surveyed investors was broad support for the current level of executive compensation disclosure. Crucially, a significant majority of these investors expressed disagreement with the premise that company size alone should be a basis for allowing more limited disclosure requirements.
Key Survey Findings: A Detailed Examination
The survey results, presented in an accompanying exhibit, offer granular insights into investor perspectives on specific proposed SEC changes.
1. Elimination of Say-on-Pay and Reduced Disclosure for Smaller Issuers: The SEC’s proposal to eliminate the Say-on-Pay vote and significantly reduce executive compensation disclosures for U.S. issuers with less than $2 billion in public float faced overwhelming opposition. A remarkable 81% of investors surveyed expressed opposition to this aspect of the SEC’s proposal. This opposition was notably consistent across investors of varying asset under management (AUM) sizes and across different geographical regions, underscoring a unified investor stance on this matter.
2. Public Float Threshold for Reduced Disclosure: The notion of establishing a public float threshold to qualify for reduced executive compensation disclosure was met with broad rejection. A substantial 79% of respondents indicated that reduced disclosure is inappropriate for companies of any size, challenging the fundamental premise of a size-based exemption. Only 21% of investors found the idea acceptable, with a small fraction acknowledging a threshold of $700 million or less – aligning with the current rules for emerging growth companies. This suggests that investors prioritize transparency regardless of a company’s market capitalization.
3. Removal of Compensation Discussion and Analysis (CD&A): The potential removal of the Compensation Discussion and Analysis (CD&A) section, a critical narrative component of executive compensation disclosures, also garnered significant opposition. A majority of investors, 69%, opposed eliminating the CD&A, highlighting their valuation of the qualitative explanations and context provided in this section, which goes beyond tabular data.
4. Reduction in Summary Compensation Table (SCT) Scope: Proposed reductions in the number of years of pay and the number of named executive officers (NEOs) presented in the Summary Compensation Table (SCT) were also met with resistance. A considerable 79% of investors opposed reducing the number of years of pay shown, while 73% opposed reducing the number of NEOs for whom pay is disclosed. This indicates a strong preference for maintaining the depth and comprehensive coverage of the SCT, which serves as a foundational element for understanding executive pay packages.
5. Removal of Specific Tabular Disclosures: The proposed removal of several key tabular disclosures – including Grants of Plan Based Awards, Option Exercises and Stock Vested, and Termination Payments – was met with near-unanimous disapproval. Between 88% and 92% of investors opposed removing these three specific tables, demonstrating a strong reliance on these quantitative data points for their analytical processes.
6. Removal of CEO Pay Ratio: While receiving the least amount of support among the individual disclosure elements targeted for removal, the CEO Pay Ratio disclosure still commanded broad support for its continued inclusion. A significant 73% of investors opposed removing this metric, suggesting that while its utility may be debated, its removal is not a widely desired outcome.
7. Removal of Risk Review: The proposal to remove the risk review disclosure also faced broad opposition, with 75% of investors opposing its removal. This indicates that investors view the disclosure of how compensation practices align with risk management as a crucial element of corporate governance.
8. Removal of Pay Versus Performance (PVP) Table: The Pay Versus Performance (PVP) table, a disclosure designed to link executive compensation to company performance, garnered the highest level of support for continued inclusion. A commanding 90% of investors opposed removing the PVP table, underscoring its perceived importance in assessing the alignment of pay with actual business outcomes.
Implications for Compensation Committees and Corporate Governance
The survey results carry significant implications for compensation committees of public companies, particularly those that might be considering or preparing for changes in disclosure requirements. While the SEC’s proposed rule changes, if enacted, could potentially reduce the administrative burden for some companies, the strong investor sentiment suggests that a significant reduction in transparency could lead to unintended consequences.
The broad investor opposition to reduced disclosure, especially based on company size, indicates that many institutional investors will continue to demand robust and comprehensive information. Compensation committees will need to carefully weigh the potential administrative savings against the risk of increased scrutiny and potential shareholder engagement if disclosures are perceived as insufficient. The survey data suggests that investors value meaningful narrative and quantitative disclosures, and any move to diminish these could lead to heightened engagement, including the possibility of shareholder proposals seeking to restore or even expand disclosure.
Furthermore, the consistent global opposition to reduced disclosure highlights the interconnectedness of global capital markets and the shared expectations of investors. Companies operating across different jurisdictions may find that investor demands for transparency remain high, regardless of localized regulatory changes.
The findings also suggest that while the SEC’s intent to simplify is understandable, the market’s appetite for information regarding executive compensation may be growing, not shrinking. Investors are clearly using these disclosures to inform their voting decisions, assess executive accountability, and understand the alignment of pay with performance and risk.
Moving Forward: Navigating Disclosure Expectations
In light of these findings, compensation committees should consider the following:
- Proactive Engagement: Given the strong investor preferences, committees might find it beneficial to proactively engage with their major shareholders to understand their specific disclosure expectations, even if regulatory requirements are relaxed.
- Focus on Quality over Quantity: While the SEC might reduce the volume of required disclosures, the quality and clarity of the remaining information will become even more critical. Ensuring that narrative disclosures are insightful and that tabular data is presented in an understandable format will be paramount.
- Strategic Assessment of Disclosure Value: Committees should conduct a strategic assessment of the value each disclosure element provides, not just in terms of compliance, but in terms of fostering investor confidence and demonstrating responsible governance.
- Anticipating Future Trends: The SEC’s proposed changes are part of a broader evolving regulatory landscape. Compensation committees should stay abreast of further SEC actions and broader trends in corporate governance to ensure their disclosure practices remain aligned with best practices and investor expectations.
Ultimately, the proposed SEC reforms, while intended to ease the burden on public companies, appear to be at odds with the prevailing views of a powerful segment of the investment community. The divergence between regulatory intent and investor expectations highlights the ongoing challenge of balancing regulatory efficiency with the demand for transparency in executive compensation and corporate governance. The coming months will be critical in observing how the SEC responds to this feedback and how companies adapt their disclosure strategies to navigate this evolving landscape.
