New rules proposed by the Securities and Exchange Commission ("SEC") that would require public companies to disclose the ratio of the compensation of its CEO to the median compensation of its employees has brought executive compensation back into the spotlight. Many of those who have commented on the proposal note the high costs associated with compliance with the proposed rule. Given the costs, complexities, and risks associated with the proposal affected companies have been urged to submit comments. Indeed, SEC Commissioners Daniel Gallagher and Michael Piwowar, who both voted against the rule's proposal, urged the submission of detailed comment. View Gallagher's remarks here and Piwowar's remarks here.
Just how much real-world influence such proposals have was discussed by the Securities Litigation and Regulatory Enforcement Blog in a post discussing how much latitude directors have in setting compensation. The post notes that a different Dodd-Frank Act executive compensation provision, the "say-on-pay" provision, which requires most issuers to include in their proxy a non-binding shareholder vote on executive compensation, is just that: non-binding. And in recognition of that fact, most courts have rejected shareholder derivative suits challenging a board's failure to recognize a negative say-on-pay vote.
Race to the Bottom discussed the steps firms can take to preempt future interference in corporate decisions by Congress. Employing executive use of corporate aircraft as an example, the blog suggests the adoption of strict policies concerning such perks, as the best means of preempting the second guessing of corporate decisions.
Finally, the D&O Diary noted that the Federal Deposit Insurance Corporation ("FDIC") has taken the unusual step of issuing a Financial Institution Letter concerning director and officer liability insurance. The blog summarizes the letter's salient points, particularly its warning to bank officials to be aware of certain exclusionary language and a reminder that insurance cannot be bought to guard against civil penalties.
For additional information on the proposed rules, see Winston & Strawn's article here.