On June 10, the U.S. Treasury Department and the Securities and Exchange Commission announced multiple developments affecting executive compensation.
- Executive Compensation Reforms Announced and Legislation Proposed
Treasury Secretary Timothy Geithner issued a statement indicating that the executive branch will be considering executive compensation reforms with the end goal of “bringing compensation practices more tightly in line with the interests of shareholders and reinforcing the stability of firms and the financial system.” In particular, the administration supports legislation for a non-binding vote on executive compensation and the independence of directors on compensation committees and their committee’s consultants.
To view Secretary Geithner’s full statement click here.
To view the “Say-on-Pay” fact sheet click here.
To view the Compensation Committee Independent fact sheet click here.
- Treasury Issues Executive Compensation Rules for TARP Participants
The Treasury issued an interim final rule on the executive compensation restrictions imposed on recipients of Troubled Asset Relief Program (TARP) funds by the American Recovery and Reinvestment Act of 2009. Such rule imposes new governance requirements, including the appointment of a “pay czar” to review compensation plans of TARP recipients receiving “exceptional assistance”, the prohibition of tax “gross-up” payments, and additional disclosure of perquisites and compensation consultants.
To view the full text of the interim final rule click here
- Chairman Schapiro Issues Statement on Executive Compensation
In a press release, SEC Chairman Mary Schapiro announced that the SEC is actively considering a package of new proxy statement disclosure rules which will cause companies to consider how compensation affects risk-taking and corporate health. The proposals that are being considered include greater disclosure regarding (i) how a company and its board manage risks, (ii) a company’s overall approach to compensation, (iii) potential compensation consultant conflicts of interests, and (iv) experience and qualifications of director nominees and the leadership structure. While the SEC has not generally served a role in setting pay scales or compensation packages, Chairman Schapiro noted that its role is to protect investors through more complete disclosure and that type of information may impact investors’ voting and investment decisions.
To view the full text of the release, click here.
Additionally, on June 11, SEC Division of Corporation Finance Deputy Director Brian Breheny testified concerning the oversight and regulation of executive compensation before the House Committee on Financial Services. Deputy Director Breheny provided testimony on the SEC’s efforts to strengthen the disclosure rules so investors have the information they need to make informed decisions.
To view the full text of Deputy Director Breheny’s testimony, click here.
To view a more detailed discussion of these compensation developments, please see the June 11, 2009, Katten Client Advisory.