The Materiality of Performance Targets in Proxy Disclosure

On September 14, 2007, the New York office authored an Alert entitled, “The Materiality of Performance Targets in Proxy Disclosure.” According to a published report, roughly half of large issuers did not provide disclosure about specific performance target levels in their 2007 proxy statements. The SEC’s comment letter initiative suggests that the staff is of the view that specific performance target disclosure is required for virtually all performance-based compensation arrangements. While companies struggle with the issue of disclosing performance targets and the staff presses its position, the issue of materiality of performance target disclosure has not yet been a focus of the public discussion. We believe that careful consideration of the materiality of performance targets in particular plan designs is contemplated by, and consistent with, the new executive compensation disclosure rules and the principles underlying those rules. We have attached to this Alert a note elaborating on these issues.