The Securities and Exchange Commission adopted rules concerning shareholder approval of executive compensation and “golden parachute” compensation arrangements as required under the Dodd-Frank Wall Street Reform and Consumer Protection Act.
The SEC’s new rules specify that say-on-pay votes required under the Dodd-Frank Act must occur at least once every three years beginning with the first annual shareholders’ meeting taking place on or after Jan. 21, 2011. Companies also are required to hold a “frequency” vote at least once every six years in order to allow shareholders to decide how often they would like to be presented with the say-on-pay vote. Following the frequency vote, a company must disclose on an SEC Form 8-K how often it will hold the say-on-pay vote.
Under the SEC’s new rules, companies also are required to provide additional disclosure regarding golden parachute compensation arrangements with certain executive officers in connection with merger transactions.
The Commission also adopted a temporary exemption for smaller reporting companies (public float of less than $75 million). These smaller companies are not required to conduct say-on-pay and frequency votes until annual meetings occurring on or after Jan. 21, 2013.
The SEC rules largely mirror the proposed ones. The revisions in these rules:
- Delay the general effective date of Jan. 21, 2011 to Jan. 21, 2013, for smaller reporting companies
- Clarify that the votes have to occur only at shareholder meetings where directors are elected
- Give companies more time to report shareholder votes and management’s voting-frequency decisions, using Form 8-K instead of Form 10-Q
- Allow a company to exclude shareholder say-on-pay proposals only if it adopts the voting frequency backed by a majority (not a plurality) of shareholders.
For more information:
SEC Press Release: http://sec.gov/rules/final/2011/33-9178.pdf
