Dodd-Frank Say on Pay

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Today, the U.S. Senate passed the "Dodd-Frank Wall Street Reform and Consumer Protection Act," or "Dodd-Frank," which is scheduled to be signed into law by the president next week. This memorandum will focus on one of the statute's provisions: requiring that companies periodically hold nonbinding shareholder votes to approve executive compensation. This requirement, which is applicable to all U.S. public companies, will be effective for the 2011 season of annual shareholders' meetings.

Required Shareholder Votes.

Dodd-Frank adds a new section 14A to the Securities Exchange Act of 1934 ("Exchange Act"). It provides that a proxy for a meeting of shareholders for which Securities and Exchange Commission ("Commission") proxy rules require compensation disclosure1 must include, not less frequently than once every three years, a resolution subject to shareholder vote to approve the compensation of executives as disclosed pursuant to Item 402 of Regulation S-K. The statute is effective for the first meeting of shareholders occurring after mid-January 2011 (six months after the statute's enactment) for which compensation disclosure is required, and the initial executive compensation approval resolution must be included at such meeting.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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