Adding to the list of reasons why most companies seem to be deciding against including a shareholder say-on-parachute payments resolution in their 2011 proxy statements (see my Blogs from December 2010), is this new Compliance and Disclosure Interpretation related to Item 402(t) "Golden Parachute Compensation," posted on February 11 by the SEC's Division of Corporation Finance. Remember, companies are only required to seek an advisory vote on "Golden Parachute Compensation" in a proxy in which shareholders are asked to approve an acquisition, merger, consolidation, etc. However, Dodd-Frank and the SEC rules would not require this approval if shareholders already had approved the company's golden parachute payments and agreements as part of a regular Shareholder Say on Pay vote. To take advantage of this exception, the company must follow the disclosure requirements of new rules, including the new "Golden Parachute Compensation" table, rather than the more general, current requirements on disclosure of termination payments.

Question 128B.01, quoted in full below, provides that, even if a company's shareholders approve a say-on-parachute payments resolution in the 2011 annual meeting proxy, if the company adds a new CEO one month later, it would need to seek shareholders approval again in any future merger proxy.

Question: Instruction 1 to Item 402(t)(2) provides that Item 402(t) disclosure will be required for those executive officers who were included in the most recently filed Summary Compensation Table. If a company files its annual meeting proxy statement in March 2011 (including the 2010 Summary Compensation Table), hires a new principal executive officer in May 2011 and prepares a merger proxy in September 2011, may the company rely on this instruction to exclude the new principal executive officer from the merger proxy's say on golden parachute vote and Item 402(t) disclosure?

Answer: No. Instruction 1 to Item 402(t) specifies that Item 402(t) information must be provided for the individuals covered by Items 402(a)(3)(i), (ii) and (iii) of Regulation S-K. Instruction 1 to Item 402(t)(2) applies only to those executive officers who are included in the Summary Compensation Table under Item 402(a)(3)(iii), because they are the three most highly compensated executive officers other than the principal executive officer and the principal financial officer. Under Items 402(a)(3)(i) and (ii), the principal executive officer and the principal financial officer are, per se, named executive officers, regardless of compensation level. Consequently, Instruction 1 to Item 402(t)(2) is not instructive as to whether the principal executive officer or principal financial officer is a named executive officer. This position also applies to Instruction 2 to Item 1011(b), which is the corresponding instruction in Regulation M-A. [Feb. 11, 2011]