SEC Adopts Final say-on-pay Rules - Advisory Votes on Executive Compensation, “Golden Parachute” Compensation, and Frequency of the Executive Compensation Vote


The Securities and Exchange Commission (SEC) has adopted final rules regarding shareholder advisory votes on executive compensation and “golden parachute” compensation arrangements,1 implementing certain provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act). The SEC proposed these rules on October 18, 20102 and adopted them substantially as proposed, with some modifications and clarifications.

New Section 14A of the Securities Exchange Act of 1934, as amended (the Exchange Act), added by Section 951 of the Dodd-Frank Act, requires public companies to conduct a nonbinding shareholder advisory vote to approve the compensation of a company’s named executive officers disclosed pursuant to Item 402 of Regulation S-K under the Securities Act of 1933, as amended (a so-called “say-on-pay” vote), and a separate nonbinding shareholder advisory vote to determine how often a company will conduct the shareholder vote on executive compensation (a so called “say-on-frequency” vote).

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