On June 12, Congressman Gary Peters (D-MI), a member of the House Financial Services Committee, introduced the Shareholder Empowerment Act of 2009, which would require the Securities and Exchange Commission to adopt new rules governing the nomination and election of directors, executive compensation, and related corporate governance matters.
The proposed legislation echoes several of the initiatives set forth in Senator Charles Schumer’s (D-NY) Shareholder Bill of Rights Act of 2009, including majority voting requirements for the election of uncontested director nominees, increased shareholder access to issuer proxy materials, heightened independence requirements for board chairpersons and “say on pay” provisions. The Shareholder Empowerment Act also corresponds in several respects with the SEC’s recent proposal to permit broader shareholder access to issuer’s proxy materials and legislative proposals initiated by the Obama administration in support of “say on pay” and similar regulation of executive compensation.
In several respects, the Shareholder Empowerment Act is more expansive than Sen. Schumer’s proposed legislation. In addition to the governance changes noted above, if enacted, the Shareholder Empowerment Act would eliminate broker discretionary voting in uncontested director elections, impose an independence requirement for compensation advisors and consultants engaged in connection with executive compensation arrangements, require issuers to adopt and disclose policies allowing them to claw-back executive compensation in circumstances involving fraud or restatement of financial statements, eliminate severance for executives terminated for “poor performance,” and enhance disclosure of performance targets tied to executive compensation.
For additional information regarding recent proposals related to shareholder access to issuer proxy materials and executive compensation, please see the June 12 edition of Corporate and Financial Weekly Digest and Katten’s June 19 Client Advisory.
To view the text of the Shareholder Empowerment Act of 2009, click here.