In June of this year, the Securities and Exchange Commission (SEC) voted to approve rule amendments (referred to in this article as the amendments) that specifically expand the definition of the so-called “smaller reporting company.” The amendments, that become effective this September, will result in 966 additional companies becoming eligible for smaller reporting company status. As a result, almost 1,000 companies can take advantage of scaled-down disclosures in their periodic reports and proxy statements, which includes opting out of executive compensation disclosures entirely. This article explores whether such an opportunity could affect executive compensation decisions altogether.

Let us begin by reviewing the amendments. The definition of smaller reporting company, prior to the amendments, comprises of companies with a public float of less than $75 million.  As result of the Amendments, smaller reporting companies will include all companies with a public float of less than $250 million, as well as companies with annual revenues of less than $100 million for the previous year and either no public float or a public float of less than $700 million. Why the change to the definition? It primarily stems from the current administration’s desire to open the capital markets. In addition, SEC Chairman Jay Clayton previously explained that “expanding the smaller reporting company definition recognizes that a one-size regulatory structure for public companies does not fit all.”