The past year has been one of change and challenge for public companies and their boards, as companies have moved to implement "say-on-pay" and other provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank"). With the 2012 proxy season on the horizon, public companies and their directors will continue to feel the impact of Dodd-Frank as the Securities and Exchange Commission ("SEC") proceeds with its ongoing efforts to implement the law. At the same time, public companies and their boards are operating in an environment where the balance of power between boards and shareholders continues to shift. The traditional, board-centric model of corporate governance continues to gravitate toward a paradigm that includes an increased role for shareholders. Activist shareholders are seeking greater participation in companies’ governance and operations, and they are exerting increased pressure on companies to adopt so-called corporate governance "best practices."
Executive Compensation
ISS Issues White Paper on New Approach in Evaluating Pay for Performance Alignment
On December 20, 2011, Institutional Shareholder Services ("ISS"), a leading proxy advisory firm, published a white paper titled "Evaluating Pay for Performance Alignment: ISS’ Quantitative and Qualitative Approach." The white paper provides greater guidance on ISS’ new approach to establishing peer groups when conducting the pay-for-performance test described in its U.S. Corporate Governance Policy 2012 Updates and provides a detailed summary of and rationale for the new quantitative and qualitative methodology ISS will implement, beginning February 1, 2012, when assessing executive compensation. The white paper is available at
ISS Releases Policy Updates for 2012 Proxy Season
On November 17, 2011, Institutional Shareholder Services ("ISS"), a leading proxy advisory firm, released its U.S. and international corporate governance policy updates for the 2012 proxy season. For details, please see the U.S. Corporate Governance Policy 2012 Updates ("2012 Policy Updates"), available at http://www.issgovernance.com/policy/2012/policy_information. The 2012 Policy Updates apply to shareholder meetings held on or after February 1, 2012. This client alert reviews the most significant U.S. policy updates and additional detail on the policies provided by Patrick McGurn, Special Counsel at ISS, at the November 18, 2011 meeting of the American Bar Association’s Business Law Section’s Subcommittee on Shareholder and Investor Relations. The client alert concludes with commentary and recommendations in light of the ISS policy updates.
Handling Internal Investigations in the Executive Compensation Area
Los Angeles partner Michael Farhang and associate James Zelenay are the authors of "Handling Internal Investigations in the Executive Compensation Area" [PDF] published in the November 7, 2011 issue of BNA’s Pension & Benefits Daily.
SEC Proposes Rules on Compensation Committee Independence and the Role of Compensation Consultants and Other Advisers
On March 30, 2011, the Securities and Exchange Commission (the “SEC”) voted unanimously to propose rules implementing Section 952 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) relating to: (1) compensation committee member independence; (2) compensation consultant and other adviser independence; and (3) compensation committee authority to retain, and disclosure regarding use of, compensation consultants and other advisers. In our July 21, 2010 client memorandum, available here, we describe in detail Section 952 of the Dodd-Frank Act, which added a new Section 10C to the Securities Exchange Act of 1934 (the “Exchange Act”).
SEC Adopts Say-on-Pay Rules
At an open meeting held on January 25, 2011, the Securities and Exchange Commission (“SEC”) voted to approve rules to implement the provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) relating to shareholder advisory votes on executive compensation (“say-on-pay”), shareholder advisory votes on the frequency of conducting say-on-pay votes (“say-on-frequency”) and shareholder advisory votes on compensation arrangements in connection with significant corporate transactions (“say-on-golden-parachutes”). The SEC did not address its proposed rules regarding disclosure by institutional investment managers of their votes on say-on-pay, say-on-frequency and say-on-golden-parachutes proposals but indicated at the open meeting that it will do so in the coming month. The final rules, adopted by a vote of 3 to 2, with Commissioners Casey and Paredes dissenting, were issued pursuant to Section 951 of the Dodd-Frank Act.
UK and European Remuneration Reform: Year in Review
In the past three years, international regulatory focus on remuneration has gripped the globe. The heart of the debate which arose in the context of remuneration structures in investment banking and their contribution to global financial crisis has extended past this into remuneration across a broad range of industries. This past year has seen a number of developments which have intensified in both the UK and Europe as we draw close to the year end. We look back at the year and consider where regulation and industry guidelines have emerged in the context of pay structures and recent developments in the area of transparency and taxation. We also provide a comprehensive review of the hugely anticipated new remuneration code[1] the final version of which was published by the Financial Services Authority last Friday.
SEC Proposes Rules for Say-on-Pay and Say-on-Golden-Parachute Votes
On October 18, 2010, the Securities and Exchange Commission ("SEC") proposed rules, available here, to implement the provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act") relating to: (1) shareholder advisory votes on executive compensation ("say-on-pay"); (2) shareholder advisory votes on the frequency of say-on-pay votes ("say-on-frequency"); and (3) shareholder advisory votes on compensation arrangements in connection with significant corporate transactions ("say-on-golden-parachutes"). The proposal includes transition provisions that companies may rely on until final rules are adopted. The SEC also proposed rules, available here, relating to disclosure by institutional investment managers of their proxy voting on executive compensation and other matters. Both rule proposals were issued pursuant to Section 951 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which we described in detail in our July 21, 2010 client memorandum, available here. Comments on the proposed rules should be submitted on or before November 18, 2010.
Executive Compensation, Corporate Governance and Other Securities Disclosure Provisions in the Dodd-Frank U.S. Financial Regulatory Act
Washington, D.C. partners Amy Goodman, Ronald Mueller and Elizabeth Ising are the authors of "Executive Compensation, Corporate Governance and Other Securities Disclosure Provisions in the Dodd-Frank U.S. Financial Regulatory Reform Act" [PDF] published in BNA’s Securites Regulation & Law on September 20, 2010.
SEC Chairman Schapiro Announces Process for Commenting in Advance on Dodd-Frank Rulemaking
On July 27, 2010, U.S. Securities and Exchange Commission ("SEC") Chairman Mary L. Schapiro announced that the SEC is implementing a new process designed to make it easier for the public to provide comments as the SEC undertakes the process of adopting rules required under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Act"), which President Obama signed into law last week. The SEC established the new process in order to provide expanded opportunity for public comment and greater transparency and accountability.