The summer is over and companies, boards, and compensation committees need to start working on adapting to and complying with the Dodd-Frank Wall Street Reform Act. As the first order of business, we are suggesting educational sessions with the board and the compensation committees. Other affected company parties should be present, including human resources, executive compensation, legal, and investor relations functions. Each of these functions will be affected by, and have an important role in responding to, Dodd-Frank and the response should be coordinated from the start.

Next, we are suggesting that compensation committees add one more question to their consideration of each compensation issue: How will we explain this decision, payment or policy in the proxy statement CD&A, and will it increase the risk that shareholders will vote "No" on Say on Pay?

The reason for this is that the Say on Pay vote is a single "yes" or "no" vote on the total compensation package provided to the named executive officers, as described in the CD&A and compensation tables. Consequently, one questionable action, payment, or practice could cause shareholders to vote "no," regardless of the reasonableness of the overall packages. Therefore, the committee should consider literally each compensation decision, payment or policy. If the overall packages of the NEOs are reasonable – even below market – but there is one blemish, such as a gross-up on perquisite payments or a single trigger golden parachute agreement, many shareholders may vote "no" on the package. There is no other way to register disapproval. They cannot criticize or object to that one provision or practice only.

Therefore, now is the time for every compensation committee to consider improvement to both (i) its compensation policies and practices, and (ii) the CD&A disclosure of those policies practices. As one of my fellow bloggers put it: we now need to write the CD&A and tabular disclosures for a new target audience – retail shareholders. To date, many of us have focused on drafting primarily to meet the SEC's disclosure requirements.