SEC Staff Guidance on "Spring-Loaded" Compensation Now Effective

SEC Staff Accounting Bulletin No. 120, which provides guidelines as to how companies should disclose and account for "spring-loaded awards" granted as compensation to executives, went into effect on December 1, 2021. The SAB was published in the Federal Register.

As previously covered, SAB No. 120 defines "spring-loaded awards" as share-based compensation arrangements, including stock options, that are awarded to executives shortly before the company announces positive market-moving information, such as an earnings release with better-than-expected results. The SEC stated that in awarding any non-routine spring-loaded compensation, companies must reflect the additional value of the award generated as a result of the market-moving information.