As it has done before, the SEC has adjusted its tentative rulemaking calendar to push back some of the expected proposal and adoption dates for the remaining executive compensation and corporate governance items on its agenda. Thanks to Mike Melbinger, who blogged this information yesterday on CompensationStandards.com (see Davis Polk’s blog for more analysis):
On Friday, the SEC modified its schedule for adopting rules relating to the Dodd-Frank Act, including the key provisions applicable to executive compensation, as follows:
August – December 2011 (planned)
– §951: Adopt rules regarding disclosure by institutional investment managers of votes on executive compensation
– §952: Adopt exchange listing standards regarding compensation committee independence and factors affecting compensation adviser independence; adopt disclosure rules regarding compensation consultant conflicts
January – June 2012 (planned)
– §953 and 955: Adopt rules regarding disclosure of pay-for-performance, pay ratios, and hedging by employees and directors
– §954: Adopt rules regarding recovery of executive compensation
– §956: Adopt rules (jointly with others) regarding disclosure of, and prohibitions of certain executive compensation structures and arrangements
July – December 2012 (planned)
– §952: Report to Congress on study and review of the use of compensation consultants and the effects of such use
Dates still to be determined
– §957: Issue rules defining “other significant matters” for purposes of exchange standards regarding broker voting of uninstructed shares
Thus, it seems unlikely that all five of the clawback, pay-for-performance, CEO pay ratio, incentive compensation rules for large financial institutions, and hedging by employees and directors provisions will be effective for next year’s proxy season. However, if they meet this schedule, one or two of the provisions will be effective for proxies filed after January (as with the say on pay rules, published in January 2011). Fortunately, the SEC will propose rules first (and already has for a couple of the provisions), so we should know well in advance which provisions will be final for the 2012 proxy season.
1st Annual Reports: CIGFO and FSOC
As noted by Vanessa Schoenthaler in her “100 F Street Blog,” Section 989E of Dodd-Frank created the Council of Inspectors General on Financial Oversight (CIGFO). Appropriately named, CIGFO is made up of the Inspector Generals of nine federal agencies-the Fed, CFTC, HUD, Treasury, FDIC, FHFA, NCUA, SEC and SIGTARP- involved in financial oversight. Last week, CIGFO released its 1st annual report.
In addition, as noted in the Dodd-Frank.com Blog, the Financial Stability Oversight Council, or FSOC, issued its 1st annual report last week too. The report fulfills the Congressional mandate to report on the activities of the Council, describe significant financial market and regulatory developments, analyze potential emerging threats, and make certain recommendations.
Lehman Case Hints at Need to Stiffen Audit Rules
Last week, Judge Kaplan of the Federal District Court for the Southern District Court of New York delivered his decision – In re Lehman Brothers Secs. and ERISA Litig. (SDNY; 7/27/11) – involving Lehman, its executives, its investment bankers and auditors. As noted in this NY Times article, Judge Kaplan’s conclusion was “the company misled investors and its officers and directors may be held liable. But the company’s auditor seems likely to escape any responsibility for an audit that wrongly concluded the company’s financial statements were completely proper.” As a result, some experts have opined that there could be shortcomings in a number of accounting standards including those on disclosures of risk, SOP 94-6, SFAS 107 and SFAS 140.
– Broc Romanek