The SEC today proposed rules that would enable shareholders to cast advisory votes on executive compensation and "golden parachute" arrangements - called for under the Dodd-Frank Reform Act.  Comments are requested by 11/18.   As proposed, public companies subject to the federal proxy rules would be required to:

• provide their shareholders ("S/H's") with an advisory vote on executive compensation and an advisory vote on the desired frequency of these votes;
• provide S/H's with an advisory vote on compensation arrangements and understandings in connection with merger transactions, known as "golden parachute" arrangements; and
• provide additional disclosure of "golden parachute" arrangements in merger proxy statements.

As proposed, institutional investment managers would be required to report their votes on executive compensation and "golden parachute" arrangements at least annually, unless the votes are otherwise required to be reported publicly by SEC rules. 

    Shareholder Approval of Executive Compensation.   Companies subject to the federal proxy rules would be required to provide shareholders with an advisory vote on executive compensation. These votes, generally known as say-on-pay votes, are required at least once every 3 years beginning with the first annual shareholders' meeting taking place on or after 1/21/11.  Certain disclosures on the say-on-pay vote would need to be in the annual meeting proxy statement, and in the Compensation Discussion and Analysis, or CD&A.

    Shareholder Approval of the Frequency of Shareholder Votes on Executive Compensation.   Companies must allow shareholders to vote on how often they would like to cast a say-on-pay vote - namely, every year, every other year, or once every 3 years.  They'd be allowed to cast this non-binding "frequency" vote at least once every 6 years, beginning with the first annual shareholders' meeting taking place on or after 1/21/11.  Related disclosures would be required. 

Shareholder Approval and Disclosure of Golden Parachute Arrangements.   Companies would be required to provide additional information about the compensation arrangements with executive officers in connection with merger transactions - e.g., "golden parachute" arrangements.  This disclosure would be required in connection with going-private transactions and 3rd-party tender offers, so that the information is available for shareholders no matter the structure of the transaction.  Further, companies would be required to provide a shareholder advisory vote to approve certain "golden parachute" compensation arrangements in merger proxy statements.

Institutional Investment Manager Reporting of Votes.

As proposed, institutional investment managers would be required to annually file with the SEC their votes on say-on-pay, frequency of say-on-pay votes, and "golden parachute" arrangements - including every such manager that manages certain equity securities having an aggregate FMV of at least $100 million.  For each vote, managers would describe the executive compensation matters voted on, disclose the number of shares over which the manager held voting power and the number of shares voted, and indicate how the manager voted.  [SEC PR 2010-198, 10/19]

For further details, click onto:   [ Proposed Rule Release No. 34-63123 - Proxy Votes ] and [ Proposed Rule Release No. 33-9153 - Say-on-Pay ]