June 21, 2012

SEC Adopts Rules Requiring Listing Standards for Compensation Committees and Compensation Advisers

Yesterday, the SEC finally adopted rules that direct the stock exchanges to adopt listing standards for compensation committees and compensation advisers under Section 952 of Dodd-Frank (Section 952 added Section 10C to the ’34 Act). The Commission adopted the rules by seriatim.

The stock exchanges have 90 days from when the SEC’s rules are published in the Federal Register to propose listing standards (and they have one year to finalize them). As noted in Mark Borges’ blog, if the exchanges and the SEC move quickly, it’s possible that the listing standards could be in place in time for the 2013 proxy season. In any event, there will be at least one new disclosure requirement in place for the 2013 proxy season – the adopting release provides that companies must comply with the disclosure changes in Item 407 of Regulation S-K in any proxy statement for a regular annual meeting occurring on or after January 1, 2013. This Item 407 change requires disclosure of an assessment of whether any work performed by a compensation consultant raises any conflict of interest (and if so, to disclose the nature of the conflict and how it was addressed).

As Mike Melbinger’s blog notes, the SEC’s rules confirm that Section 10C does not require compensation committees to retain – or obtain advice – only from independent advisers. A listed issuer’s compensation committee may receive advice from non-independent counsel, such as in-house counsel or outside counsel retained by management, or from a non-independent compensation consultant or other adviser, including those engaged by management.

Here is the adopting release – and the press release. We will be posting memos in’s “Compensation Committee” Practice Area. There are none out yet, but yet all three of our blogs have spoken on this development…

Tune in next Thursday, June 28th, for the webcast – “Proxy Season Post-Mortem: The Latest Compensation Disclosures” – to hear Mark Borges, Dave Lynn and Ron Mueller analyze what was (and what was not) disclosed this proxy season as well as discuss these new rules.

UK One Step Closer to Binding Say-on-Pay: On to Parliament

Yesterday, the UK took another step closer to mandating binding say-on-pay when Business Secretary Vince Cable presented a bill to Parliament mandating binding say-on-pay for consideration. Here is a page with information on the “Enterprise and Regulatory Reform Bill.”

As I understand it, it looks very likely that the bill will pass and perhaps be law by October of 2013. There would actually be three types of say-on-pay votes:

– Review of past compensation – non-binding and annual
– Prospective review on compensation policy – binding and would happen every three years so long as the company’s pay policy hadn’t changed; if it had changed, would happen annually
– Share plans – binding

The biggest debate is over the annual advisory vote – which is backward looking – and supermajority vote thresholds. This Manifest blog captures some of the debate. I’ll be blogging more on this as I figure it out.

What will happen now is that amendments to the Enterprise Bill are introduced in the House of Commons for debate. It then goes to committee and then to the upper chamber, the House of Lords, which then has their debate and committee and then if all is well, it is passed into law (unlike Congress, no riders or changes can be snuck in – only the bill that has been debated can pass). The Financial Reporting Council – which is a separate body and which looks after the UK Governance Code – will then do its own consultation regarding amendments to the UK Governance Code to ensure that the Law, as it applies to UK incorporated companies, will apply to listed companies. Thanks to Sarah Wilson of Manifest for helping to explain the UK process!

SEC Chief Accountant Kroeker Headed Back to Private Sector

Yesterday, the SEC announced that that Chief Accountant Jim Kroeker will leave the SEC in July to enter the private sector. No word on where he is headed…some conjecture in FEI’s Financial Reporting Blog.

Deal Cube Tournament: Round Two; 2nd Match

As noted in these rules (and keep sending more pics for the next tourney), please vote for two of the following four cubes below:

Casket (Opens & Closes; Deal Closed on Halloween)
Milwaukee Brewers Beer Tap
Golf Set with Putter, Cup and Balls
Pill Bottle

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