Compensation Actually Paid (CAP) vs. SCT
Compensation Actually Paid is a pay figure required by the SEC’s pay-versus-performance rule, Item 402(v) of Regulation S-K, that starts from the Summary Compensation Table total and adjusts the equity component for share price movement and vesting. It is disclosed alongside the Summary Compensation Table, not in place of it, so the same executive and the same year can carry two different figures.
Compensation Actually Paid is a required executive pay figure that runs parallel to the Summary Compensation Table. It was mandated by Dodd-Frank Section 953(a), which directed the SEC to require disclosure of how executive pay relates to company performance, and it sits at Item 402(v) of Regulation S-K. A company discloses it next to the table’s own total, so the two figures appear side by side rather than one replacing the other.
The construction is deliberately mechanical. CAP begins with the executive’s Summary Compensation Table total for the year, removes the grant-date fair value of equity awards reported there, and then substitutes a set of value-based adjustments: the year-end fair value of awards granted during the year that remain unvested, the change in fair value of awards granted in earlier years that are still unvested, the fair value at the vesting date of awards that vested during the year, and a deduction for awards that failed to meet their vesting conditions. The pension element is treated the same way, with the change in pension value removed and the year’s service cost used instead.
The practical effect is that CAP moves with the share price in a way the Summary Compensation Table total cannot. The table fixes equity at the value assigned on the grant date and never revisits it; CAP re-marks unvested awards to the share price at fiscal year-end and marks vested awards to the price on the vesting date, while also carrying the change in value of awards made in prior years. A year in which the share price rose after grant will typically leave CAP above the table total for the same executive; a year in which it fell will typically leave CAP below.
CAP is reported differently depending on the executive. The chief executive — the principal executive officer — is reported individually, while the remaining named executive officers are reported as an average for the year. The composition of that group changes as the roster changes, so the averaged figure is not one person’s pay and can shift when a named executive officer joins or leaves the group, even if the remaining officers are paid identically.
Three different pay measures are often confused, and CAP is the middle one. The Summary Compensation Table total is an accounting value fixed at grant. CAP is a value at a point in time that includes unvested awards the executive has not received and may never receive, alongside vested ones. Realized pay — cash and shares the executive actually obtained by vesting, exercising or selling — is a third measure that CAP does not report. An executive whose share price fell can show CAP well below the table total while having realized more in cash than either figure suggests, if earlier awards were exercised or sold at a favorable moment.
The pay-versus-performance table that carries CAP also carries the performance side of the comparison. It reports cumulative total shareholder return for the company and for a peer group, net income, and a company-selected performance measure, together with a narrative describing the relationship between CAP and those measures and between CAP and the Summary Compensation Table total. The rule also requires a list of the financial performance measures the company treats as most important in linking pay to performance.
The disclosure is not required of every filer. Emerging growth companies are exempt from it, and smaller reporting companies provide it in a reduced form. Among the companies that do provide it, the table covers several fiscal years, which is what makes a year-over-year reading possible even when a single year’s figures look anomalous.
Read carefully, CAP is the figure that ties reported pay to what shareholders experienced. It can fall sharply in a year when no pay decision changed, and it can rise in a year when no new grant was made, because it carries the value of earlier awards through to the current share price. It is most informative next to the Summary Compensation Table total for the same year and next to the shareholder return figures in the same table, because the three together show whether a gap between them came from pay decisions or from the share price.
- Start from the Summary Compensation Table totalThe reported total for the executive and year is the figure CAP adjusts, so the two numbers share a starting point and differ only in what is done to the equity and pension elements.
- Remove the grant-date equity valueThe fair value of equity awards granted during the year, as reported in the table’s stock and option award columns, is subtracted.
- Substitute value-based equity figuresYear-end fair value is added for unvested awards granted in the year; the change in fair value is added for unvested awards from earlier years; the fair value at the vesting date is added for awards that vested during the year; and value is deducted for awards that failed to vest.
- Adjust the pension elementThe change in pension value reported in the table is removed and the year’s service cost is used instead, so the figure reflects the year’s benefit accrual rather than an actuarial change in the plan’s value.
- Report by executive groupThe chief executive’s CAP is stated individually, while the remaining named executive officers are reported as an average for the year.
- Pair it with performanceThe figures appear with company and peer-group total shareholder return, net income and a company-selected measure, plus a narrative describing how pay related to those measures.
- Pay Versus Performance table, Item 402(v) of Regulation S-K
- Compensation Actually Paid for the chief executive and the average for the other named executive officers, shown next to the Summary Compensation Table totals and the performance measures.
- Summary Compensation Table
- The starting figure the CAP adjustments are applied to, and the grant-date equity values that are removed and replaced.
- Outstanding Equity Awards at Fiscal Year-End table
- The share counts and award values that the year-end and vesting-date fair value adjustments are calculated from.
- Compensation Discussion and Analysis
- The committee’s account of how the pay program is meant to work, which is where an explanation of a gap between the two measures is usually found.
The two figures are built from the same starting point but answer different questions: what was awarded for the year, and what that pay was worth once the share price moved.
| Summary Compensation Table total | Compensation Actually Paid | |
|---|---|---|
| What it measures | The accounting value of the pay awarded for the year | The value of that pay adjusted for share price movement and vesting |
| Treatment of equity awards | Grant-date fair value reported in full for awards granted during the year | Grant-date value removed and replaced with year-end, vesting-date and change-in-value figures |
| Treatment of pensions | The change in pension value is included as reported | The change in pension value is removed and the year’s service cost used instead |
| When the figure stops changing | At grant — it is never updated for later share price movement | At fiscal year-end, when unvested awards are marked to the share price |
| What it captures | The pay decisions made during the year | The pay decisions plus the shareholder return earned on previously granted awards |
| How it is reported by person | Each named executive officer individually | The chief executive individually, the other named executive officers as an average |
| What it still omits | Cash or shares the executive actually received | Cash or shares actually received — unvested awards counted may never deliver that value |
- Compensation Actually Paid is not cash the executive received: it includes unvested awards valued at fiscal year-end that may never be realized at that value.
- It is not realized pay either. Realized pay reflects shares actually vested, exercised or sold, which CAP does not measure, so the two can point in opposite directions in the same year.
- A CAP figure below the Summary Compensation Table total is not evidence that a company cut pay — it is usually the share price moving after the awards were granted.
- Summary Compensation Table (SCT)The mandatory proxy table reporting each named executive officer’s pay by column, and the starting point CAP adjusts.
- Grant Date Fair ValueThe accounting value assigned to an equity award on the day it is granted — the value CAP removes and replaces with later share prices.
- VestingThe point at which an award’s conditions are satisfied and it becomes the holder’s own, which is one of the dates CAP values an award at.
- Restricted Stock Unit (RSU)An equity award that vests on continued employment, and one of the award types whose value CAP re-marks each year.
- Performance Stock Unit (PSU)An equity award that vests on meeting performance goals, and the award type whose value most often diverges between grant-date and later measurement.