On February 11, 2011, the SEC’s Division of Corporation Finance issued new Compliance and Disclosure Interpretations (CDIs) with respect to shareholder approval of executive compensation and to golden parachute compensation.
- CDIs 169.01, 169.02 and 169.03 all address how to determine whether an issuer is a smaller reporting company as of January 21, 2011. An issuer that is a smaller reporting company as of January 21, 2011, is entitled to rely on the delayed phase-in period for smaller reporting companies for holding say on pay and say on frequency votes. An issuer’s status as a smaller reporting company is based on the issuer’s public float or annual revenues at the end of the second fiscal quarter of 2010. A change in status, if any, based on the issuer’s second fiscal quarter of 2010 results is effective on the first day of the issuer’s first quarter of 2011, regardless of whether the issuer has filed a report with the SEC indicating its new status.
- CDI 169.04 provides that the vote on say on frequency, as required by Rule 14a-21(b), does not need to be in the form of a resolution.
- CDI 169.05 provides that it is permissible for the say on pay vote to omit the words, “pursuant to Item 402 of Regulation S-K,” and to replace these words with a plain English equivalent.
- CDI 169.06 provides that it is permissible for the say-on-frequency vote to include the words “every year, every other year, or every three years, or abstain” in lieu of “every 1, 2, or 3 years, or abstain.”
- CDI 128B.01 relates to golden parachute compensation disclosure. Instruction 1 to new S-K Item 402(t)(2) provides that disclosure is required for those executive officers included in the most recently filed Summary Compensation Table. However, disclosure is always required for the principal executive officer and principal financial officer, even if disclosure was not provided for these individuals in the most recently filed Summary Compensation because they assumed their positions after the Summary Compensation Table was filed.