Understanding Executive Compensation and Non-GAAP Financials

Growing numbers of U.S. public companies are tying executive pay to “adjusted” earnings figures that often overstate performance as measured by generally accepted accounting principles (GAAP), the standard for financial statements filed with the SEC. Robert Pozen, senior lecturer at the MIT Sloan School of Management, discusses CII’s April 29 petition LINK to the SEC asking the agency to require public companies to reconcile any “adjusted” earnings measures they use to GAAP figures in the proxy statement’s Compensation Discussion & Analysis section, and to explain their rationale for using adjusted measures in setting executive pay.