Securities And Exchange Commission Issues Proposed Rules Relating To Say-On-Pay, Say-When-On-Pay, And Golden Parachute Arrangements


On October 18, 2010, the Securities and Exchange Commission (SEC) proposed amendments to its rules under the Securities Exchange Act that would implement the requirements of Section 951 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) relating to shareholder approval of executive compensation and “golden parachute” compensation arrangements.

Section 951 of the Dodd-Frank Act amended the Exchange Act by adding new Section 14A. Section 14A(a)(1) requires that, not less frequently than every 3 years, a company’s proxy statement for an annual or other meeting of shareholders for which SEC rules require compensation disclosure must include a separate resolution subject to a non-binding shareholder vote to approve the compensation of named executive officers. This advisory vote on executive compensation is generally referred to as “say-on-pay.”

Section 951 also added Section 14A(a)(2) to the Exchange Act, requiring that a company’s proxy statement include, not less frequently than once every 6 years, a separate resolution subject to a non-binding shareholder vote to determine whether the say-on-pay vote required by Section 14A(a)(1) will occur every 1, 2, or 3 years. This advisory vote is generally referred to as “say-when-onpay.”

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