Item 402
Also called Regulation S-K Item 402, executive compensation disclosure.
The SEC disclosure item that requires the Summary Compensation Table and related executive pay tables. CompensationBase is an Item 402 SCT reader, not a Form 4 or 8-K pay feed.
What it is
Item 402 of Regulation S-K is the SEC rule that tells registrants how to disclose executive and director compensation: who is a NEO, what the SCT columns mean, grant-date fair value, the CD&A, grants of plan-based awards, outstanding equity, options exercised and stock vested, pension and NQDC tables, potential payments on termination, and—separately—Pay Versus Performance under Item 402(v).
CompensationBase is an Item 402 SCT reader. Form 4 trades and Form 8-K Item 5.02 amounts are not mixed into the headline total. Other 402 tables (except as they explain the SCT) are not the ranking numerator.
Why companies use it
Item 402 exists so compensation disclosure is standardized across issuers instead of each company inventing a brochure.
Companies follow it because a deficient proxy can draw SEC comments and investor criticism.
Pros
- Column definitions are law-like enough to compare Apple to a bank.
- NEO rules stop companies from omitting the CFO.
- Grant-date fair value is specified, reducing (not eliminating) valuation games.
Cons
- Complexity: 402 is long, and 402(v) added another table with a different pay definition.
- Standardization still leaves footnotes where the economics hide.
- Readers who mix 402 tables with Form 4 still misstate “pay.”
Examples
SCT vs 402(v)
Item 402’s SCT Total is grant-date. Item 402(v) compensation actually paid marks equity to market. CompensationBase ranks the former and does not ingest the latter.
What is out of scope
A new-hire 8-K that quotes a $20 million grant is Item 5.02 news. It becomes SCT pay in the next Item 402 table, not on the 8-K date in this catalog.
On CompensationBase
CompensationBase is an Item 402 SCT reader. Form 4 trades and Form 8-K Item 5.02 amounts are not mixed into the headline total.
Related terms
- Summary Compensation Table
The Item 402 table in a proxy statement that lists each named executive officer’s pay components and total for up to three fiscal years. CompensationBase extracts figures from this table.
- Named executive officer
The executives Item 402 requires in the SCT, typically the CEO, CFO, and the next three highest-paid executive officers. CompensationBase’s catalog is S&P 500 named executive officers.
- Pay versus performance
The Item 402(v) proxy disclosure that compares compensation actually paid with company performance measures such as TSR. CompensationBase does not ingest this table.