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Expect to See Reporting in the “Bonus” Column of the Summary Compensation Table in 2021

We expect that the performance goals most compensation committees set for their executives’ annual incentive programs have been rendered null and void by the ongoing pandemic. However, we also expect that most compensation committees will still want to make some amount of annual incentive payment to executives for 2020. 

When the SEC overhauled the compensation reporting requirements in 2006, adding the Summary Compensation Table (as well as the CD&A and other tables), one of the anomalous features was the column in the SCT designated as “Bonus.” Back then, and with each new generation of executive compensation professionals trained since then, we had to explain that the annual payments, which 99% of the nation’s population think of (and are often communicated to executives and employees) as bonuses are not reported in the Bonus column of the Summary Compensation Table. Rather, these payments are reported in the “Non-Equity Incentive Plan Compensation” column. Generally, a payment is only reported in the Bonus column if it is a fixed or guaranteed amount, e.g., by contract, or a wholly discretionary amount, e.g., not based on performance or determined pursuant to one or more pre-established performance measures.  

This is not news to most readers, but it may be a helpful reminder for some that next year most of us will be reporting payments in the Bonus column of the Summary Compensation Table, for a change, rather than in the Non-Equity Incentive Plan Compensation column.

This entry has been created for information and planning purposes. It is not intended to be, nor should it be substituted for, legal advice, which turns on specific facts.