Dodd-Frank: Impacting Executive Compensation

by Ken Urish 12. March 2012 08:05
Among several other purposes, when the Dodd-Frank Act became law in 2010 it required public companies to comply with a number of disclosure and shareholder-voting provisions regarding their compensation practices, and gave the SEC the authority to make additional rules in furtherance of these requirements. The SEC adopted a number of new provisions effective in 2012 requiring consideration of risk that could be associated with any of an organization's compensation plans, as well as the solicitation of shareholder input on executive compensation practices. Those are: Say on Pay – a non-binding shareholder vote is required at least once every three years to approve the compensation of the executive offers Say on Pay Frequency – the SEC permits companies to solicit a non-binding vote on the frequency of shareholder Say on Pay votes (every one, two, or three years) Shareholder Disclosure and Approval of Golden Parachutes – the rules require an advisory shareholder vote related to all compensation arrangements with executive officers in connection with any merger, acquisition, consolidation, proposed sale, or other disposition of all or substantially all assets of the company What's ahead? Compensation committees should be aware that many additional regulations are expected to be developed during 2012 that will be implemented for 2013. Further analyses and disclosures (e.g., CEO pay compared with shareholder performance, CEO pay as a percentage of the "median" company employee (compensation, etc.) are in process and will require new and more in-depth examination and communication of executive pay practices.
Categories: Advisory