New rules proposed by a divided SEC on Wednesday would require public companies to disclose the relationship between executive compensation and the company’s financial performance.

The rulemaking is required by the Dodd-Frank Wall Street Reform and Consumer Protection Act, P.L. 111-203. The proposed rules are designed to give shareholders more information when they vote to elect directors and make advisory votes on executive compensation.

The proposed disclosures would be required in proxy or information statements in which executive compensation disclosure is required. The SEC voted 3-2 to propose the rules.

“The net result of the proposed rule should be enhanced pay versus performance disclosure in the proxy statement,” Commissioner Kara Stein said in her published remarks. “It should make it easier for shareholders to locate, understand, and analyze executive compensation information before they have to vote.”

Commissioner Daniel Gallagher, who dissented, said that although the rulemaking is required by law, the SEC has other, more pressing issues to tackle. He said the disclosures resulting from the proposed rules are too prescriptive and may be misunderstood by retail investors.

“The more appropriate path forward would be to admit that we have not solved the very difficult question of how to align executive pay with performance,” Gallagher said in a published statement. “Perhaps because we shouldn’t be involved in that determination in the first place.”

Under the proposed rule, companies would be required to disclose in a table executive pay and performance information for themselves as well as companies in a peer group. Companies would be required to tag the information in an interactive data format.

Companies would be required to disclose executive compensation actually paid for their principal executive officer, with adjustments for pensions and equity awards. Companies also would be required to disclose the average compensation paid to their remaining executive officers.

For performance measures, companies would be required to report a total shareholder return metric for themselves and for companies in a peer group.

All companies except for smaller reporting companies would be required to disclose information for the last five fiscal years. Smaller reporting companies would be required to disclose information for the last three fiscal years. Phase-in periods for the requirements are provided in the proposed rules.

The proposed disclosure statements would not apply to emerging growth companies or foreign private issuers.

Comments can be made within 60 days of publication of the proposal in the Federal Register at the SEC’s website.

—Ken Tysiac ( ktysiac@aicpa.org ) is a JofA editorial director.