In connection with the SEC’s massive overhaul of executive compensation disclosure, the SEC also amended the Form 8-K filing requirements for current reporting of compensatory arrangements with management and directors. The new rules are effective for Form 8-K filings made for triggering events that occur on or after November 7, 2006. The SEC’s amended release No. 33-8732A (as published in the Federal Register on September 8, 2006) will be available on its website at:

Under the revised rules, executive compensation arrangements are eliminated from the scope of Form 8-K Items 1.01 and 1.02 (relating to entry into or amendment or termination of material definitive agreements). Instead, these arrangements must be disclosed under a new revised Item 5.02. Prior to the revisions, Item 5.02 was limited to the appointment and departure of directors or specified officers.

Form 8-K, which requires the reporting of specified events within four business days, is intended to capture those events that are "unquestionably or presumptively material to investors." According to the SEC’s release, since Item 1.01 first became effective in 2004, companies were reporting compensatory arrangements under Item 1.01 that did not appear to fall within this materiality standard.

To address this apparent over-disclosure, the SEC amended Form 8-K: (1) to exclude from Items 1.01 and 1.02 those management contracts and compensatory arrangements addressed by Item 601(b)(10)(iii)(A) or (B) of Regulation S-K; and (2) to limit current reporting of new or modified compensatory plans, contracts, arrangements or related awards (whether or not written) under Item 5.02 to those:

  • that are material and that are entered into in connection with a triggering event under Item 5.02(c) or (d) (e.g., the appointment of a new principal executive officer, president, principal financial officer, principal accounting officer, principal operating officer or person performing similar functions or the election of a new director); or
  • that are material and that involve either a principal executive officer, a principal financial officer or any other named executive officer ("NEO") for whom disclosure under Item 402(c) of Regulation S-K was required in the most recent filing requiring such disclosure.

Under revised Item 5.02, disclosure is also limited to a brief description of the compensatory arrangement and need not comply with the more detailed disclosure requirements of Item 402 of Regulation S-K. Grants or awards (or modifications) are not required to be disclosed if they are materially consistent with the terms of previously disclosed plans or arrangements and they are disclosed the next time the company is required to provide new disclosure under Item 402 of Regulation S-K.

Under the revised rules, where an NEO’s salary or bonus could not be calculated and included in the Summary Compensation Table for the most recent fiscal year (e.g., because bonuses or targets had not yet been determined), a current report under Item 5.02 of Form 8-K is triggered upon any event as a result of which the amounts become calculable in whole or part. In such an event, the Form 8-K must include disclosure of the salary or bonus amount and a new total compensation figure including that salary or bonus amount.

The SEC’s amendments to Form 8-K should help companies to determine more narrowly the circumstances under which a new or modified compensatory arrangement is subject to real-time reporting. Whether companies will reduce the number of Forms 8-K that they file as a result remains to be seen.

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