• A nine-column table (the “PVP Table”) showing the following for each of the five most recently completed fiscal years (subject to a phase-in period so that the first year showed three years and the second will show four years):
   
  
  • CEO Summary Compensation Table (SCT) total compensation and “compensation actually paid” (CAP) to the Principal Executive Officer (PEO) 
  • Average total SCT compensation and CAP to other named executive officers (NEOs)
    
  • Company cumulative total shareholder return (TSR)
    
  • Cumulative TSR of a company-selected industry/line of business index or peer group (weighted according to market capitalization at the beginning of each period for which TSR is reported)
    
  • Company net income
    
  • The most important measure used by the company to link pay and performance (the company-selected measure or CSM)

• Descriptions (using graphs or narrative, or both) that compare: 
  
  
  • PEO CAP and other NEOs’ average CAP to company cumulative TSR
    
  • Company cumulative TSR to peer group cumulative TSR
    
  • PEO CAP and other NEOs’ average CAP to net income
    
  • PEO CAP and other NEOs’ CAP to CSM (and any supplemental measures, if applicable)
• List of three to seven performance measures (including the CSM) most important for linking CAP to performance

Two CDIs clarify how awards granted prior to an equity restructuring or IPO are treated:

• Equity restructuring. Awards granted prior to an equity restructuring (such as a spin-off) that are still outstanding and unvested, including awards modified in connection with the restructuring, should be included in the CAP calculation (CDI 128D.14).
   
• IPO. The change in fair value of awards granted before an initial public offering (IPO) should be based on their fair value as of the end of the prior fiscal year (versus the fair value at IPO) (CDI 128D.15).

• Preferential vesting on retirement. If retirement-eligibility is the only vesting condition, an award would be treated as vested in the year that the holder becomes retirement eligible for purposes of calculating CAP (whether the award is paid at retirement eligibility, actual retirement or on the original vesting date). But, if awards are subject to “additional substantive conditions”, such as a market (i.e., relative TSR or stock price) or performance condition, those other conditions must also be considered in determining when an award has vested. Mercer interprets this to mean:
    
  
  • General rule:  Awards that won’t be forfeited if an employee retires are treated as vested when the employee becomes retirement-eligible (even if they aren’t paid until actual retirement or on the original vesting schedule).
    
  • Exception for certain performance-based awards: If awards continue to be subject to performance goals (e.g., through the date the employee retires or through the end of the performance period), they aren’t treated as vested unless and until the goals are achieved (CDI 128D.18).

• Certification of performance by compensation committee. While a performance-based vesting condition is considered satisfied when the goal is achieved, a provision that requires the compensation committee to certify achievement could create an additional substantive vesting condition (e.g., where employees would forfeit the award unless they remain employed through the date of certification). In this case, the award wouldn’t be considered vested for purposes of calculating CAP until certification occurs (CDI 128D.19). For example, if the performance cycle for performance share units (PSUs) ends December 31, 2023 but employees would forfeit the award if they terminated employment before committee certification in March 2024, the PSUs wouldn’t be treated as vested until March 2024. Similar to the retirement guidance, this CDI is inconsistent with how awards are treated for purposes of the Option Exercises and Stock Vested Table.
   

• Market and performance conditions. The guidance treats awards with market conditions as unvested (and included in the CAP calculation) until the market (and any service or other performance) condition is satisfied. This is the case even though market conditions aren’t considered vesting conditions under U.S. GAAP and market conditions are already reflected in an award’s fair value. Also, the fair value at the end of the prior fiscal year must be deducted for awards that fail to meet the market condition during the CFY if the award is forfeited (CDI 128D.16).
  

• Companies can value awards using a “valuation technique” that differs from the one used to determine the grant date fair value as long as the technique is permitted under Topic 718 and the award meets the Topic 718 requirements to use the technique. The disclosure must include any valuation assumptions that differ materially from those used to determine the grant date value and the reason for the change (CDI 128D.20).

• But it isn’t acceptable to value awards as of the end of a CFY based on methods not prescribed by GAAP. For example:
   
  • The expected term assumption to value options shouldn’t be determined using a method that isn’t acceptable under GAAP, such as a “shortcut approach” that simply subtracts the elapsed actual life from the expected term assumption at the grant date.
    
  • The expected term for "plain vanilla” options shouldn’t be determined using the “simplified” method if the options don’t meet the “plain vanilla” criteria as of the valuation date. For example, the simplified method can’t be used for an underwater option (CDI 128D.21).

Appendix