SEC Adopts Rule on Say-On-Pay and Golden Parachute Shareholder Advisory Votes

On January 25, a divided Securities and Exchange Commission voted 3-2 to adopt new rule amendments to implement provisions concerning shareholder advisory votes on executive compensation and “golden parachute” compensation arrangements as required under the Dodd- Frank Wall Street Reform and Consumer Protection Act (See our “Corporate and Securities News” issue dated July 21, 2010).

Background

Section 951 of the Dodd-Frank Act requires companies subject to federal proxy rules to provide their shareholders with an advisory vote on: (i) executive compensation, generally known as “say-on- pay” votes; (ii) the desired frequency of say-on-pay votes, also known as the “frequency” vote; and (iii) compensation arrangements and understandings in connection with merger transactions, known as “golden parachute” arrangements, which would need to be disclosed in merger proxy statements.

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