As all public companies should be well aware, on July 21, 2010, Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Act”) was signed into law. Enacted primarily in response to the recent financial crisis, the Act is a far-reaching and complex piece of legislation. Among the many actions and topics covered by the Act, certain corporate governance and executive compensation disclosure requirements were amended, including what disclosures must be made in a company’s annual proxy statement. Many of the requirements in this area were left vague under the language in the Act or the timing uncertain and, under the Act, the implementation of these rules is dependent on the Securities and Exchange Commission (the “SEC”) taking action to interpret the requirements and adopt the necessary regulations.
The SEC recently announced a general timeline for its anticipated rulemaking activities with respect to the corporate governance and executive compensation disclosure requirements, as well as other provisions of the Act. Based on the proposed rulemaking schedule, it seems clear that the shareholder vote items required under the Act (including the so-called “Say-on-pay,” “Frequency of Say-on-pay” and “Say on Golden Parachute” votes) will be applicable to proxy statements beginning in early 2011, but guidance regarding the timing and effective dates for most of the other new corporate governance and executive compensation disclosure requirements mandated by the Act will not be released until later this year or some time next year and may not be in effect for the 2011 proxy season.
The chart on the following page sets forth the main corporate governance and executive compensation provisions of the Act, along with the time period in which the SEC intends to release proposed and final rules. For a general discussion of these provisions, see our previous general memorandum on the Act, and our memorandum on the impact of the Act on public companies.