SEC adopts say-on-pay rules for executive compensation
By Charles Oshurak, Schneider Downs
On January 25, 2011, the SEC adopted new rules regarding shareholder approval of executive compensation and the golden parachute compensation arrangements as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act.
The ruling requires Say-on-Pay votes to be conducted at least once every three years as well as a frequency vote at least once every six years to allow shareholders to identify how often they would like to see such votes occur. An 8-K filing is then required following the frequency vote to disclose the results. These requirements begin with the first annual shareholders’ meeting taking place on or after January 21, 2011 with a two-year temporary exemption for smaller reporting companies (those with a public float of less than $75 Million).
Along with these Say-on-Pay requirements, these most recent rules will also require additional disclosures regarding executive compensation in connections with mergers. These arrangements, often called golden parachute arrangements, must be disclosed in detail for named executive officers of both the acquiring company and the target company. Additionally, for certain golden parachute arrangements, companies will be required to hold a shareholder advisory vote for approval of these arrangements. These disclosure and vote requirements will be effective for statements and forms filed on or after April 25, 2011