It has become common for companies to issue supplementary disclosure about their financial results in addition to those required under generally accepted accounting principles (GAAP). This includes companies voluntarily disclosing alternative measures of CEO compensation, which sometimes differ from those reported in the summary compensation tables of the annual proxy. A company might disclose adjusted compensation because it believes this measure to be more informative about executive incentives than SEC-designated calculations. Alternatively, it might do so to make its compensation practices and payouts appear more favorable than under SEC rules.

In the article “Pro Forma Compensation: Useful Insight or Window Dressing?” Senior Consultant Youfei Chang examines whether alternative measures of compensation are useful in assessing CEO compensation and tries to understand the motivation for disclosing this information. Dr. Chang considers whether alternative pay calculations are beneficial in helping investors understand the relationship between CEO pay and performance.