The Securities and Exchange Commission has issued proposed rules that would enable shareholders to cast advisory votes on executive compensation and "golden parachute" arrangements.
The rules are called for by Section 951 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Under the proposed rules, public companies subject to the federal proxy rules would be required to provide their shareholders with an advisory vote on executive compensation and an advisory vote on the desired frequency of these votes.
They would also be required to provide shareholders 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.
The proposed rules would also require that institutional investment managers 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.
Last year, the SEC adopted rules requiring public companies with outstanding obligations under the Troubled Asset Relief Program to provide a shareholder vote on executive pay in their proxy solicitations. The Commission also adopted rules requiring enhanced disclosure of executive compensation by public companies in their proxy statements.
