U.S. issuers will have to report on how CEO pay compares to company performance, in amendments to the Securities and Exchange Commission’s (SEC) pay versus performance rule.

In an August 25 announcement, the SEC said it had “long recognized the value to investors of information on executive compensation” and that the new rule would make it easier for shareholders to assess a public company’s decision-making.

The amendments require registrants to disclose specified executive compensation and financial performance measures for their five most recently completed fiscal years. Publicly-listed companies will also be required to report on total shareholder return (TSR), the TSR of industry peers, and net income.

Registrants will also have to describe the relationships between the executive compensation actually paid and each of the relevant performance measures, as well as the relationship between the registrant’s TSR and the TSR of its selected peer group.

“I am pleased that the final rule provides for new, more flexible disclosures that allow companies to describe the performance measures it deems most important when determining what it pays executives,” SEC Chair Gary Gensler said, adding that the “rule will help investors receive the consistent, comparable, and decision-useful information they need to evaluate executive compensation policies.”

The final rule will become effective 30 days after the publication of the release in the Federal Register, and registrants must comply with the new disclosure requirements in proxy and information statements for fiscal years ending on or after December 16, 2022.