Historically, foreign private issuers (FPIs) have accounted for about one-quarter of all initial public offerings (IPOs) on U.S. exchanges, though this percentage reached more than half in 2024.
While listing in the United States can provide access to greater liquidity and more capital than many other non-U.S. exchanges, it also means that the FPI likely will be subject to executive compensation disclosure requirements that differ from their headquarters location as well as from those applicable to U.S. domestic issuers. Given these requirements, it is important for FPIs to consider several factors.
A company listing its shares in the U.S. can qualify as an FPI if it meets certain criteria:
These criteria are evaluated annually, so a company that goes public as an FPI can lose its FPI status in a subsequent year.
It is worth noting that these criteria, first established more than 20 years ago, are currently in focus at the SEC who issued a concept release in June 2025 to solicit public comments on potential changes. The possible approaches to amending the FPI definition set out in the SEC’s fact sheet are:
If the SEC makes changes to the definition of an FPI, it will likely also have implications on the executive compensation disclosure requirements. The SEC is also currently seeking public comment on executive compensation disclosures for domestic filers.
The executive compensation disclosure requirements for FPIs can be substantially less rigorous than for U.S. domestic issuers. However, if the FPI’s jurisdiction has its own executive pay disclosure rules that are more rigorous than the default FPI requirements, then the FPI must report compensation in a way that aligns with the rules of their country of incorporation.
01
No individual executive officer compensation packages need to be disclosed, and no summary compensation table or related compensation disclosure tables are required. Instead, FPIs can report on the aggregate amount of compensation paid and value of benefits provided to all executive officers and members of the board of directors as a group.
02
FPIs are not required to publish a narrative describing executive pay programs or the associated decision-making process by the company’s board of directors. Instead, FPIs are required to provide less rigorous descriptions of major executive compensation programs, including:
In addition, material developments on executive officer compensation arrangements (e.g., employment agreements, contracts) only need to be disclosed if their disclosure is required in the FPI’s country of incorporation or under the rules of another, non-U.S. exchange on which the FPI trades its shares.
03
FPIs are not required to hold a say-on-pay or say-on-parachute vote in the event of a merger or takeover. However, FPIs may be subject to local market equivalent votes based on requirements in the country of their incorporation.
04
FPIs are required to submit new and amended equity incentive plans to shareholders for a binding vote.
05
FPIs are not required to publish a CEO pay ratio or pay vs. performance analysis.
06
FPIs are required to adopt an executive recoupment (clawback) policy under the same terms as U.S. domestic issuers, as these are affected via the listing exchanges. FPIs also are subject to the Sarbanes-Oxley Act, which prohibits loans by the company to executive officers or directors. Lastly, FPIs are subject to IRC Section 409A regarding deferred compensation limits as well as 280G/4999 regarding excess parachute payments, but these are applicable only to FPI employees who also are U.S. citizens or residents.
It is important to note that, while limited disclosure requirements may apply, some FPIs will elect to voluntarily provide more fulsome disclosures for the benefit of potential institutional investors who consider executive pay practices as part of their buy/hold/sell decisions.
Most executive pay disclosures for U.S. domestic issuers are made through the annual proxy statement prior to the annual shareholders meeting. Because FPIs are broadly exempt from holding annual shareholder meetings, they are not required to file proxy statements. Instead, they use alternative versions of other common SEC forms to disclose executive pay (Table 1).
| Topic | SEC form used by U.S. domestic issuers | SEC form used by FPIs |
|---|---|---|
| Executive and director compensation disclosures prior to the public listing | S-1 | F-1
|
| Executive and director compensation disclosures for the most recently completed fiscal year | DEF 14A (proxy statement) | 20-F
|
| Periodic disclosure of material changes to executive compensation or new executive compensation agreements | 8-K | 6-F
|
| Executive and director equity ownership | Forms 3, 4 and 5 | No equivalent requirement for FPIs |
Institutional Shareholder Services’ (ISS’) frequently asked questions on their proxy guidelines summarize how they handle foreign-incorporated companies in their analyses. For those that qualify as an FPI, ISS will generally refer to the guidelines for the market that is responsible for, or most relevant to the item on the ballot, and/or the FPI Guidelines set out in their regional proxy voting guidelines.
In practice we observe that ISS assesses equity compensation plan proposals from FPIs generally in accordance with their U.S. guidelines, when the form and design is aligned with U.S. norms. Executive pay-design practices typically default to the home country. This can create challenges for FPIs that have U.S.-style pay programs but have a headquarter location elsewhere. Practices that are in accordance with widely accepted U.S. norms may not be supported in other markets such as granting a significant portion of equity compensation in time-vested restricted stock units or enabling some level of payout for relative total shareholder return performance below median.
Glass Lewis’ voting guidelines for FPIs are less clear but, in our experience, they typically assess pay practices and proposals in relation to a combination of the U.S. and home country guidelines.
Navigating the regulatory landscape and understanding shareholder expectations are two of the most challenging and important parts of going public in the United States.
While FPIs have a potentially lower threshold of reporting requirements for executive pay, they should still create policies and pay packages that would stand up to shareholder scrutiny and align executive interests with those of their new shareholders. Those policies and packages should also be thoughtfully designed as they would otherwise be, with the context of practices in the relevant talent markets and company strategy.
Normative practices in different geographies can differ significantly and understanding these differences is important to making effective and informed decisions. FPIs can lose their status and become U.S. domestic issuers at any point in the future, so boards and management should work together to ensure that, if the company is required to report fully on executive officer compensation in the future, its approach to compensation levels and plans is rooted in sound guiding principles and likely to be seen favorably by shareholders.
Lastly, all FPIs should continually track the disclosure requirements for their country of incorporation and ensure full compliance with local regulations. As those disclosure requirements evolve, they may also trigger a need to make additional or more detailed disclosures on the company’s U.S. filings. To avoid any missteps, it is critical that FPIs work closely with counsel to ensure compliance with the applicable requirements in all relevant markets.
