Section |
Details |
Practitioner Impact |
Anticipated
Implementation Date |
 Section 951
Shareholder Advisory Vote on Executive Pay
|
Publicly traded companies are required to have a non-binding advisory vote at least every three years on compensation of named executive officers as disclosed pursuant to the SEC executive compensation disclosure rules. Once every six years, the shareholders must also vote on whether or not they hold a say on pay vote every one, two, or three years. |
Educate senior management and the board regarding the new requirements and heightened scrutiny on compensation.
Help articulate how your executive compensation program supports your business strategy in the CD&A section of the proxy statement and how it aligns executives' long-term interests with those of shareholders.
Consider whether there are any compensation elements that may lead to inappropriate risk-taking and make any appropriate changes. |
Final rules will be adopted prior to the 2011 proxy season. |
Section 951
Shareholder Advisory Vote on Golden Parachutes |
Publicly traded companies must submit a non-binding advisory vote to shareholders in connection with a merger or acquisition that provides a clear description on any agreements with named executive officers that will be impacted by the merger or acquisition. |
Educate senior management and the board regarding the new requirements and be prepared to disclose all agreements with named executive officers that would be impacted by a merger or acquisition. |
Final rules will be adopted prior to the 2011 proxy season. |
Section 952
Independent Compensation Committees and Advisors |
Publicly traded companies will be required to ensure that compensation committees include only independent directors and have authority to hire compensation consultants and other advisors who meet independence standards. |
Evaluate proposed rule and determine if the proposed implementation would impact current practice. |
The SEC plans on proposing rules soon. |
Section 953
Disclosure of Pay versus Performance |
Requires publicly traded companies to disclose the relationship between the executive compensation and the financial performance of the company. |
Educate senior management and the board regarding the new requirements and heightened scrutiny on compensation.
This could be a very complex calculation to make depending on how “executive” and “compensation” are defined.
Be prepared to calculate the executive compensation “actually paid” for the performance period to comply with the new disclosure rules. |
The SEC plans to publish proposed requirements by July 2011. |
Section 953
Disclosure of Ratio of Median Employee to CEO Pay |
Requires proxy disclosure of median employees (as calculated under the SEC;s executive compensation disclosure rules) to CEO pay. |
Educate senior management and the board regarding the new requirements and potential resources needed to make the calculation.
This could be a very difficult — if not impossible — ratio to calculate depending on the final definition of total pay and employees included in the calculation. Practitioners should begin reviewing data sources for all of the various types of pay and benefits to be prepared to deal with the complexity of the calculations. |
The SEC plans to publish proposed requirements by July 2011. |
Section 954
Claw-back Provision |
Requires that publicly traded companies set policies to take back incentive-based compensation (including stock options) from current or former executives if it was based on inaccurate financial statements that don’t comply with accounting standards. The company has to take back the amount of compensation above what the executive would have been paid based on the new financial statements. The Act changes the look-back period from 12-months to three-years. |
Educate senior management and the board regarding the new requirements and heightened scrutiny on compensation.
Review all current clawback provisions to be sure they comply with the new rules or such a policy exists, and if not, make the appropriate modifications.
Coordinate with Sarbanes-Oxley requirements and review any applicable state wage legislation/regulations and international laws to determine whether clawback could violate such laws. |
The SEC plans to publish proposed requirements by July 2011. |
Section 955
Disclosure Regarding Employee and Director Hedging |
Publicly traded companies must disclose whether any employees or director is permitted to purchase financial instruments that are designed to hedge or offset a decrease in the market value of the company’s stock. The SEC plans to publish proposed requirements by July 2011. |
Evaluate proposed rule and determine if the proposed implementation would impact current practice. |
The SEC plans to publish proposed requirements by July 2011. |
Section 956
Enhanced Compensation Structure |
Requires only financial institutions to disclose to the appropriate Federal regulator the structure of all incentive-based compensation arrangements. Federal regulators have nine months after the date of enactment to promulgate the regulation. |
Be prepared to help your organization make the required disclosures to comply with the new regulations. |
Federal regulators have nine months after the date of enactment to promulgate the regulation. |
Section 971
Proxy Access |
Amends Section 14(a) of the Exchange Act to provide that the SEC is authorized, but not required, to adopt proxy access rules which would allow shareholders of all publicly traded companies to use the company’s proxy materials to nominate directors in addition to the company’s candidates for election. The SEC is expected to offer a final rule shortly, to be ready for the 2011 proxy season. The SEC has released its final rule regarding proxy access. |
Evaluate proposed rule and determine if the proposed implementation would impact current practice. |
The SEC has released its final rule regarding proxy access. |
Section 972
Chairman & CEO Positions |
Publicly traded companies must disclose in proxy whether CEO is independent from the Chairman of the Board or if they are the same individual and why the company has chosen this structure. The SEC has already addressed the issue of Chairman and CEO positions in its February 2010 rule. The above language codifies the regulation. The SEC has already addressed the issue of Chairman and CEO positions in its February 2010 rule. The above language codifies the regulation. |
Evaluate proposed rule and determine if the proposed implementation would impact current practice. |
The SEC has already addressed the issue of Chairman and CEO positions in its February 2010 rule. The above language codifies the regulation. |
