In the last couple of days, the SEC in general and its executive compensation rules under the Dodd-Frank Act in particular have been on the front pages.
In the last couple of days, the SEC in general and its executive compensation rules under the Dodd-Frank Act in particular have been on the front pages. One reason, of course, is the criticism of Chairman Mary Jo White by Senator Elizabeth Warren (which is roughly equivalent to me criticizing LeBron James for his basketball skill). But for our purposes, the more relevant reasons are that the SEC seems poised to release proposed rules on Compensation Clawbacks under Dodd-Frank Act Section 954 and re-proposed rules on Incentive Compensation Reporting and Prohibitions for Financial Institutions under Dodd-Frank Act Section 956 (which also feature compensation clawbacks, not coincidentally).
The compensation clawback provisions of Section 954 are not only one of the most significant provisions of the Dodd-Frank Act (for compensation, at least), but also the last major provisions of the Act for which the SEC has not proposed rules. This will be a major development for corporate America. (By coincidence, I will be speaking on the topic of compensation clawbacks on June 11 in Atlantic City at an event planned months ago. If we get the new proposed rules before then, it should be very interesting.)
The SEC, together with six other federal agencies (as required by Dodd-Frank), first proposed incentive compensation rules under Section 956 in winter/spring 2011. We, and many others, commented on the unworkability of the proposed rules back in May 2011, and the agencies went back to the drawing board. Even for those who are not a financial institution, the restrictions and reporting rules on incentive compensation arrangements may become relevant in the future. As we have seen with many other areas, once rules and regulations are rolled out to one sector of the economy, politicians and others often quickly work to expand their scope to the rest of public company America.
One could say that there really is no good time to get new rules from the SEC. However, for most companies, proxy and annual meeting season has ended or will soon end. Thus, your lawyers can study the new rules over the summer and report back to you after you return from the beach/golf course/Europe. Therefore, as your lawyer*, I advise you to take off the rest of the summer and let us worry about these new rules.
*Not really, but this is still sound advice.