SEC Adopts “Say On Pay” And Golden Parachute Approval Rules

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As required by the Dodd-Frank Wall Street Reform and Consumer Protection Act, enacted in July 2010, the Securities and Exchange Commission adopted rules governing shareholder approval of executive compensation (“say-on-pay”) and “golden parachute” arrangements. These rules give shareholders of domestic companies with shares registered for trading with the SEC advisory votes on executive compensation, the frequency of say-on-pay votes, and golden parachute compensation arrangements and require additional disclosure regarding the foregoing.

The say-on-pay and “say-when-on-pay” rules apply to all shareholder meetings at which directors will be elected, except that a “smaller reporting company” (generally a company with less than $75 million of market value of shares held by non-affiliates) is not required to comply until January 21, 2013. Rules requiring enhanced disclosure and advisory votes on golden parachute arrangements apply to all merger and takeover filings after April 25, 2011, and affect all related SEC filed forms, including proxy statements, Rule 13e-3 Transaction Statements, and Schedule TO filings. The say-on-pay and say-when-on-pay votes do not require a preliminary proxy filing or apply to foreign private issuers.

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