Corporate Governance Legislation Passes Senate

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You should be aware of certain provisions of Sen. Christopher Dodd's (D-Conn.) financial reform bill that passed the Senate Thursday, May 20, 2010. The proposal is considered by many to be the most extensive overhaul of financialsector regulation since the 1930s. The legislation now moves to the House, where it must be reconciled with a similar bill that passed there in December 2009. The legislation approved in the Senate would affect all public companies, not just financial services companies, and the following corporate governance areas are worth noting:

Majority Voting

The proposal requires majority voting in uncontested elections of directors. Accordingly, a director who does not receive a majority vote would be required to submit a resignation. The board may accept the resignation or vote to reject it. If the board votes to reject a resignation, the issuer must disclose the reasons for the rejection and how the board concluded that rejection is in the best interests of the company and its shareholders.

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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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