On July 16, the U.S. Treasury Department delivered draft “say-on-pay” legislation to Congress that would require that all publicly traded companies allow shareholders a non-binding vote on executive compensation as disclosed in the company’s proxy statement for annual meetings held after December 15.  

As proposed, the disclosures subject to a shareholders’ vote would include tabular data summarizing salary, bonuses, stock and option awards and total compensation for the issuer’s senior executive officers and narrative summaries of golden parachute and pension compensation, and of the board of directors’ compensation decisions. Additionally, the proposed legislation would require, in connection with a merger or acquisition of an issuer, a separate stockholder vote on golden parachutes provided to executives in connection with such merger or acquisition. Issuers would be required to include and clearly disclose in their soliciting materials the exact amounts senior executive officers would receive if the merger or acquisition is completed.  

The Treasury noted that similar regulations have been adopted in the United Kingdom and that several public companies in the United States have voluntarily submitted to “say-on-pay.” The Treasury believes that increased dialogue between shareholders and issuers has led directly to the modification of compensation practices.  

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