Time to Get Ready for Say-on-Pay as SEC Releases Proposed Rules

In accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Reform Act") and its own timetable for proposing regulations required by section 951 of the Reform Act, the Securities and Exchange Commission on October 18, 2010 issued a press release and published proposed rules (Release No. 33-9153) (the "Proposed Rules") for shareholder advisory votes on executive compensation ("Say-on-Pay") and golden parachutes. The SEC also concurrently released proposed regulations (Release No. 34-63123) which would require certain institutional investment managers to report annually how they voted on executive compensation matters (we will cover this second set of proposed regulations in a separate blog article).

As we previously commented (see our blog from July 26, 2010 "The Regulatory March to Reform Executive Compensation Practices Takes Another Step Forward"), the Reform Act implemented numerous new laws affecting executive compensation and corporate governance at publicly-held companies. Section 951 of the Reform Act requires that publicly held corporations provide their shareholders with the ability to render separate votes to approve: (1) executive compensation, (2) the frequency of shareholder Say-on-Pay votes, and on (3) golden parachute arrangements for the company's named executive officers ("NEOs") in connection with merger/acquisition transactions ("M&A"). The shareholder votes are advisory in effect and are not binding on the company or its board of directors. The Reform Act also gave the SEC the authority to exempt certain companies, such as smaller reporting companies, from Say-on-Pay.

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