How to Read a Pay Versus Performance Table (SEC DEF 14A)
A CEO "made $40 million last year" headline and the number sitting in that company's own Pay Versus Performance table are frequently not the same figure, and the gap is not a reporting error — it's two different definitions of "pay." The SCT total is the traditional compensation disclosure. Compensation Actually Paid is a newer, separate construct the SEC built specifically to connect pay to shareholder return. Reading the actual table, rather than a summary of it, is the only way to know which number you're looking at.
What the SEC actually requires
Since fiscal 2022, Item 402(v) of Regulation S-K has required a standardized table in the proxy, covering the most recent five fiscal years (three for a company's first year of compliance):
- SCT total. The Summary Compensation Table total for the principal executive officer (PEO) and, on average, the other named executive officers (NEOs) — the traditional pay figure investors are used to seeing.
- Compensation Actually Paid (CAP). The SCT total adjusted per a specific SEC formula: unvested equity awards are revalued to year-end fair value rather than grant-date value, and pension figures are adjusted to current service cost. This is meant to reflect what the reported pay figure would look like if it moved with the stock instead of being fixed at grant.
- Company and peer-group total shareholder return (TSR). The value of a $100 investment made at the start of the measurement period, for the company and for its disclosed peer group, over the same years as the pay figures.
- Company-selected measure. One financial or operational metric the company itself picks as most important to its pay-for-performance link — revenue, adjusted operating income, a subscriber count, whatever the company considers its own best measure.
If more than one person served as principal executive officer during a covered year — a CEO transition mid-year, for instance — the table discloses each PEO's figures separately for that year. Averaging them together loses exactly the information the table exists to show.
What Compensation Actually Paid is — and isn't
CAP is not cash. It is not what showed up in a bank account. Because unvested equity is revalued to year-end stock price every year regardless of whether anything vested or sold, CAP can swing by tens of millions of dollars purely because the stock price moved — with zero actual cash changing hands. A large CAP figure in a year the stock ran up says the equity got more valuable on paper. It does not mean the executive took home a bigger check.
This cuts both ways: CAP can also show as sharply negative in a down year for the stock, even in a year the executive received a normal salary and bonus. Reading CAP as "what the CEO earned" in the plain-English sense of the phrase is the single most common misreading of this table.
How to read the table without being misled
- Pull the year-by-year figures as filed. SCT total, CAP, peer-group TSR, and the company-selected measure — copied from the table, not estimated from a pay article.
- Check whether CAP tracked TSR, not just the SCT total. The table's entire purpose is comparing CAP to shareholder return; a rising CAP alongside falling TSR (or the reverse) is the actual signal worth a second look.
- Treat the company-selected measure as issuer-specific. It isn't standardized across companies, so don't compare one company's measure value directly to another's.
- Handle a CEO transition year carefully. Read each PEO's row separately rather than averaging or blending two people's figures into one number for that year.
- Remember what CAP represents before drawing a conclusion. A dramatic year-over-year CAP swing driven by stock price movement is not the same finding as a dramatic swing driven by a new pay package.
Common questions
What is Compensation Actually Paid (CAP)?
An SEC Item 402(v) construct required in the Pay Versus Performance table: the Summary Compensation Table total adjusted to reflect unvested equity awards revalued to year-end fair value, and pension value adjusted to current service cost. It is a disclosure figure, not a cash amount the executive received that year.
Is Compensation Actually Paid the same as a CEO's paycheck?
No. CAP can swing sharply from year to year purely because a company's stock price moved, since unvested equity is revalued to year-end price regardless of whether any shares actually vested or were sold. A large CAP figure in a down year for the stock is common and does not mean cash actually left the company.
What is the company-selected measure in a Pay Versus Performance table?
Each company picks one financial or operational measure it considers most important to linking pay to performance and discloses it in the same table, alongside total shareholder return. It is issuer-specific by design, so one company's measure and value are not directly comparable to another company's.
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