SEC moves toward requiring companies to show link between executive pay, financial performance

Economic Indicators Associated Press

Federal regulators have taken a step toward requiring public companies to show the relationship between the compensation of their top executives and the company's financial performance.

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The 3-2 vote Wednesday by the Securities and Exchange Commission on the so-called "pay for performance" rules follows a 2013 proposal that would require companies to disclose the pay gap between CEOs and ordinary employees. The hot-button issue of executive compensation took on greater prominence during the 2008 financial crisis.

The new rules would require companies to report compensation, including stock options and other benefits, for their top executives for the last five years in most cases. That would be compared in a table with the company's annual return to shareholders during the same period, defined as the percentage change in the stock price.