SEC Adopts Final Say-on-Pay Rules

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On January 25, the Securities and Exchange Commission adopted, by a 3-2 vote, final rules under Section 14A of the Securities Exchange Act of 1934, which was enacted by Section 951 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Section 14A requires public companies to conduct separate non-binding shareholder advisory votes to approve the named executive officer (NEO) compensation (say-on-pay) and the frequency of the say-on-pay vote (say-on-when). Section 14A also requires expanded, tabular format disclosure of NEO compensation arrangements in connection with mergers or similar transactions (golden parachutes) and a related separate advisory vote on golden parachutes in merger proxy statements. Although the final rules are not effective until 60 days after publication in the Federal Register, the say-on-pay and say-on-when requirements are effective for annual or special shareholder meetings occurring on or after January 21, 2011, under the Dodd-Frank Act provisions. The final rules provide transition guidance pending the effectiveness of the rules. The rules on golden parachute disclosure and the separate advisory vote are effective April 25.

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