Synopsis: SEC’s Final Rules for “Say-On-Pay” and “Golden Parachutes”

The SEC issued Final Rules regarding public company requirements to disclosure and ask shareholders for a non-binding vote on    executive compensation practices, known as “Say-On-Pay.”

News

  • The new rules specify that say-on-pay votes required under the Dodd-Frank Act must occur at least once every three years beginning with the first annual shareholders’ meeting taking place on or after Jan. 21, 2011.
  • Companies also are required to hold a “frequency” vote at least once every six years in order to allow shareholders to decide how often they would like to be presented with the say-on-pay vote. Following the frequency vote, a company must disclose on an SEC Form 8-K how often it will hold the say-on-pay vote.
  • Under the SEC’s new rules, companies also are required to provide additional disclosure regarding “golden parachute” compensation arrangements with certain executive officers in connection with merger transactions.
  • The Commission also adopted a temporary exemption for smaller reporting companies (public float of less than $75 million). These smaller companies are not required to conduct say-on-pay and frequency votes until annual meetings occurring on or after Jan. 21, 2013.  “Public Float” is typically defined as the portion of a company’s outstanding shares that is in the hands of public investors, as opposed to company officers, directors, or controlling-interest investors.

For further details see http://www.sec.gov/news/press/2011/2011-25.htm.

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