The Advisors' Blog

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– Broc Romanek, CompensationStandards.com

Yesterday, Treasury announced that it has drafted
two different pieces of executive compensation legislation – one
related to say-on-pay and the other regarding compensation committee
independence – that they’ve sent to Congress as part of the “Investor
Protection Act of 2009.” Last week, Treasury began issuing other parts
of “The Investor Protection Act of 2009” and more sections are
forthcoming. These draft bills are consistent with the Obama
Administration’s White Paper that was released last month. Here is the say-on-pay press release and bill language – and here is the committee independence press release and bill language.

Rep. Barney Frank issued a statement
yesterday promising quick action in the House, specifically that the
“Financial Services Committee will be marking up legislation next
week.” It’s unknown what the timetable for consideration in the US
Senate will be.

Below is a summary of the two pieces of proposed
legislation, both of which would be implemented through SEC rulemaking:

1. Say-on-pay vote on executive compensation disclosures:

–  Annual meetings after 12/15/09 will be required to
include a non-binding shareholder vote on the compensation disclosed in proxy
statements.

–  The proxy or consent solicitation for any meeting after
12/15/09 involving an M&A transaction or sale of assets must include tabular
disclosure of golden parachute payments, and provide for a non-binding
shareholder vote to approve these payments.

2. Compensation committee independence:

– Compensation committee members would be subject to the
same additional independence standards as audit committees members under Rule
10A-3 (no consulting or advisory fees and cannot be an
affiliate).

–  Compensation consultants, legal counsel and other
advisors to the committee shall meet independence standards to be promulgated by
the SEC.

– The compensation committee has the authority to retain
independent consultants and is directly responsible for their appointment,
compensation and oversight (copied from the audit committee oversight of
auditors).

 –  Proxy statements must disclose whether the compensation
committee has retained an independent consultant, and if not, why
not.

 –  The compensation committee has the authority to retain
legal counsel and is directly responsible for their appointment, compensation
and oversight (copied from the audit committee oversight of auditors).  There is
no requirement that proxy disclosure be made as to whether the committee
retained such legal counsel. 

 –  Companies must provide funding for the hiring of
independent consultants and legal counsel by the committee.

 –  The SEC is required to study the use of compensation
consultants and report to Congress in two years.

The SEC’s “Wish List”: 42 More Changes!?!

For
those that don’t think that there have been enough regulatory changes
proposed so far this year – or this decade for that matter – you’ll be
happy to see this list
of 42 desired changes that are reported to have been sent by the SEC to
Congress. The 42 changes would impact quite a few areas of the federal
securities laws – and are unlikely to be grouped together into a single
bill. Rather, parts may be embedded into other legislation, etc.