On July 31, 2009, the House of Representatives passed the “Corporate and Financial Institution Compensation Fairness Act of 2009,” which would require advisory votes on executive compensation for public companies subject to the proxy rules, as well as enhanced compensation committee independence for listed companies.
The legislation, if ultimately enacted, would mandate that all public companies soliciting proxies or consents for an annual meeting must provide for a separate advisory shareholder vote on executive compensation. Further, the legislation would require additional disclosure and a non-binding vote on any compensatory arrangements of executive officers relating to certain extraordinary corporate transactions whenever proxies or consents are solicited in connection with such a transaction.
In addition, the legislation, if enacted, would require the Securities and Exchange Commission (“SEC”) to promulgate rules directing the national securities exchanges to adopt strict standards for the independence of compensation committee members. These rules also would require that compensation committees have authority and funding to retain consultants and counsel, and that such consultants and counsel also be independent from management. These rules would closely track the requirements for audit committees adopted as part of the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”).
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