Who Is Considered an Executive Officer?

A practical guide for US public companies

Determining who qualifies as an “executive officer” under US securities laws is not always straightforward. It requires careful analysis of both title and function. Because different definitions apply across key regulations, including Section 16 reporting and other reporting under the Securities Exchange Act of 1934, as amended (the Exchange Act), missteps can lead to compliance risks. This guide breaks down the overlapping definitions and offers practical insights to help US public companies navigate these requirements.

Executive Officer Definitions

US securities laws use different definitions of “executive officer” depending on the regulatory context. The two definitions most implicated for US public companies are Rule 3b-7 under the Exchange Act, which defines who is an “executive officer” generally, and Rule 16a-1(f), which defines “officer” for purposes of Section 16 reporting and short-swing profit liability.

Although these definitions overlap significantly, they are not identical and serve different purposes. In particular, Rule 3b-7 executive officer status turns on whether an individual performs a policymaking function, rather than solely on their title. The following table summarizes and compares the key elements of each definition.

	EXCHANGE ACT “EXECUTIVE OFFICER” — Rule 3b-7	SECTION 16 “OFFICER” — Rule 16a-1(f)
PURPOSE	Defines who is an “executive officer” for general Exchange Act purposes	Defines who is an “officer” for Section 16 reporting and short-swing profit liability purposes
SPECIFICALLY INCLUDES	President Vice presidents in charge of a principal business unit, division, or function (such as sales, administration, or finance) Any officer who performs a policymaking function for the company Persons performing similar policymaking functions for the company	President Principal financial officer Principal accounting officer (or controller) Vice presidents in charge of a principal business unit, division, or function (such as sales, administration, or finance) Any officer who performs a policymaking function for the company Persons performing similar policymaking functions for the company
PARENT AND SUBSIDIARY OFFICERS	Executive officers of subsidiaries may be deemed “executive officers” if they perform such policymaking functions for the company	Officers of the company’s parent(s) or subsidiaries may be deemed “officers” if they perform policymaking functions for the company

What Does “Policymaking Function” Mean?

Whether an individual performs a “policymaking function” is determined based on all relevant facts and circumstances. As reflected in Rule 16a-1(f), a “policymaking function” is not intended to include policymaking functions that are not significant, and the analysis depends on the individual’s actual role within the organization rather than their title alone. Relevant considerations may include whether the individual performs important executive duties, makes or implements significant company policy, or is likely to obtain material nonpublic information in performing those duties.

Titles may be indicative, but they are not determinative. An individual may hold a senior-sounding title, such as vice president, and still not be considered an executive officer if their duties are limited, operational, or otherwise insignificant in the context of the company’s overall management. Conversely, an individual without a traditional officer title may be deemed an executive officer if they perform significant policymaking functions for the company.

In assessing whether an individual performs a policymaking function, companies should consider whether the individual can make or implement policy for the company, rather than merely make recommendations or participate in conversations regarding the company’s policy or strategy. The analysis should focus on what decisions the individual can make independently, what matters require approval by others, and whether the individual’s role is significant to the management and direction of the business.

Questions to Ask Regarding “Policymaking Function”

Does the individual have the final say in decisions?
Does the individual have regular access to inside information?
Whom does the individual report to? Does the individual report directly to the CEO?
What decision-making committees does the individual serve on?
What decisions does the individual make with respect to the business of the company?
Does the individual have the authority to commit the company to significant contracts, transactions, or expenditures?
Is the individual’s role significant?
Which operations does the individual oversee?
Does the individual control or direct a principal business unit, product line, or revenue-generating segment?
Does the individual control the hiring and firing within their part of the business?
What percent of revenue does the business segment that the individual oversees contribute to the business?
Was the individual who held the position before the prospective individual considered an executive officer? How has the role changed under the new individual?
Has there been any internal reorganization of the company to give the individual more or fewer duties?
Is the individual one of the most highly paid officers?
Does the individual regularly present their area of oversight to the board of directors?

Takeaway

There is no one-size-fits-all approach to determining whether an individual performs a policymaking function. While titles and reporting lines matter, the analysis depends heavily on the company’s unique facts and circumstances and the individual’s role within it.

Reporting Implications of Being an Executive Officer

Determining whether an individual is an executive officer has significant implications under US securities laws. Executive officer status affects who must be disclosed in company filings, what must be reported about them and their compensation, and which trading and liability regimes apply. As a result, companies should carefully evaluate and document executive officer determinations and apply them consistently.

Section 16 reporting and liability: Individuals who qualify as "officers" under Rule 16a-1(f) are subject to Section 16's reporting requirements and may be liable under Section 16(b) for short-swing profits. Subject to applicable exemptions, they must report beneficial ownership of the company's Section 12-registered equity securities, and changes in such ownership, on Forms 3, 4, and 5.
Biographical and executive compensation disclosures: Executive officer status, as determined under Rule 3b-7, informs disclosure under Item 401 of Regulation S-K, which requires the inclusion of biographical and background disclosure for executive officers in the company’s annual report or proxy statement. Not every Rule 3b-7 executive officer will be a named executive officer. NEO status depends on the applicable Item 402 definition, including the individual’s role, compensation, service at fiscal year-end, and whether the company is subject to scaled disclosure rules.
Form 8-K reporting: The departure of any named executive officer, and the appointment or departure of the principal executive officer, president, principal financial officer, principal accounting officer, or principal operating officer, must be disclosed under Item 5.02.
Securities Act of 1933 Rule 144: Securities held by executive officers are generally considered control securities for purposes of Rule 144. As a result, executive officers are subject to resale restrictions, including volume limitations, manner-of-sale requirements, and Form 144 filing obligations.
Exchange Act Rule 10b5-1 plan disclosures: Executive officers subject to Section 16 are also covered by Item 408 of Regulation S-K, which requires disclosure of the adoption, termination, or material modification of Rule 10b5-1 trading arrangements and other trading plans.

Documenting Executive Officer Status

Companies should take a consistent approach to documenting how executive officer determinations are made. As a matter of good governance, the board of directors (often through a committee or in consultation with management) should determine who is designated as an executive officer, with the basis for such determinations documented and maintained by the company. Executive officer determinations should be revisited at least annually, as roles evolve or organizational changes occur, and in connection with significant events. Documentation should be maintained centrally to support consistent application across Section 16 reporting, Exchange Act disclosures, and Form 8-K reporting.

About Goodwin’s Public Company Advisory Practice

Our Public Company Advisory Practice advises US and global public companies, as well as private companies preparing to go public, on securities law and corporate governance matters, including SEC regulatory compliance, disclosure requirements, stock exchange listing standards, and strategic deal considerations. With former senior SEC officials and top-tier corporate lawyers on our team, we deliver real-time, practical insights informed by our deep understanding of SEC operations and Goodwin’s expansive roster of hundreds of public company clients across a variety of industries.