Will Your Proxy Card Pass Muster? SEC Releases Say-on-Pay Guidance


In the wake of the financial crisis, executive compensation is a highly volatile issue for many pubic companies.

Shareholders and the public are increasingly putting pressure on companies to reign in compensation packages; yet, at the same time, companies must work to retain key executives.

In addition, under the Dodd-Frank Wall Street Reform and Consumer Protection Act, executive compensation is also becoming more highly regulated. Shareholder advisory votes regarding executive compensation plans became required on January 21, 2011 for most public companies (smaller reporting companies are not required to conduct say-on-pay votes until January 21, 2013).

Under the new rules, public companies must conduct say-on-pay votes at least once every three years at a stockholder meeting where proxies are solicited for the election of directors. At least once every six years, companies are required to allow shareholders to vote on how often they would like to be presented with the say-on-pay vote: every year, every other year, or once every three years. In addition, companies must disclose in the proxy statement the general effect of the say-on-pay vote. While the vote is non-binding, a company will need to explain how the most recent vote affected compensation policies.

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