July 17, 2009

Treasury Announces Two Executive Compensation Bills

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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

  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

  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

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

 –  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.

July-August Issue: Deal Lawyers Print Newsletter

This July-August issue of the Deal Lawyers print newsletter was just sent to the printer and includes articles on:

– Threshold Issues in Cross-Border Merger-of-Equals Transactions
– The Role of the Board in Turbulent Times: How to Avoid Shareholder Activism
– Private Equity in 2009: “Back to Basics” Practice Tips: Part II
– A “Sleeper”: Delaware Court Stresses Importance of Employment/Non-Competition Agreements with Target Employees

If you’re not yet a subscriber, try a “half-price for rest of ’09” no-risk trial to get a non-blurred version of this issue for free.

– Broc Romanek