The SEC seems to understand that there might be many people that want to provide comments on the Dodd-Frank Act before the SEC has had time to pull together draft rules. Yesterday, the SEC has launched a new public comment page for those interested in commenting on Dodd-Frank to provide comments prior to the issuance of proposed rules by the SEC.
Here’s a link to the Press Release about this action:
http://www.sec.gov/news/press/2010/2010-135.htm
Here’s the link to the SEC’s Dodd-Frank comment page:
http://www.sec.gov/spotlight/regreformcomments.shtml
Note that the comments are to be submitted based on the sections of Dodd-Frank. The executive compensation comment section appears under Title IX — Investor Protection and Improvements to the Regulation of Securities.
ISS is in the process of conducting its annual Policy Survey for 2010. ISS is focusing on respondents fundamental views and priorities regarding a small number of key corporate governance issues. ISS has made the survey significantly shorter this year than in the past – only 29 questions. Participants will receive preliminary results in August with key findings from the survey.
If you are interested in participating in ISS’ Policy Survey this year, act quickly. The survey will close on August 3. To access the survey, just visit www.issgovernance.com/policy/2010survey.
In addition to the executive compensation provisions in the Dodd-Frank Act, there are a few corporate governance and miscellaneous provisions worth noting.
Corporate Governance:
Section 971. Proxy Access—SEC may include rules requiring issuers to include shareholder nominees for director elections and follow a certain procedure in relation to a solicitation of a proxy.
Section 972. Disclosures Regarding Chairman and CEO—SEC shall issue rules within 180 days after enactment of Dodd-Frank Act that will require companies to disclose in their annual proxies why the company has chosen:
- The same person to serve as chairman of the board and CEO (or in equivalent positions); or
- Different individuals to serve as chairman of the board and CEO (or equivalent positions).
Miscellaneous
Section 1503. Reporting Requirements Regarding Coal or Other Mine Safety—Requires companies that operate a coal or other mine to include in their periodic report with the SEC (Annual Report and Form 10-Qs) specified safety information about each mine, including total number of violations of mandatory health or safety standards.
Section 1504. Disclosure of Payment By Resource Extraction Issuers—requires “resource extraction issuers” to include in their annual reports information relating to any payment made by the company, a subsidiary or a company under control of company, to a foreign government or the Federal government for the purpose of the commercial development of oil, natural gas, or minerals, specifying the amount and type of such payments for each project and the type and total of such payments made to each government.
The Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010 was signed into law by President Obama on Friday, June 25. Among other things, it could ultimately have an impact on standard equity vesting provisions. Why?
Under this Act, the required funding of pension plans for companies relying on the pension funding relief offered by the Act will be increased in any year by the amount of “excess employee compensation” it pays that year, plus the amount of any extraordinary dividends and redemptions.
“Excess employee compensation” is defined as the aggregate amount includible in income for any employee for any plan year over $1 million. Also included in this $1 million amount are assets set aside or reserved during the year to pay nonqualified deferred compensation using a trust or similar arrangement, or transferred to such a trust/arrangement by a plan sponsor to pay deferred compensation to an employee.
But, certain amounts are excluded from the definition of “excess employee compensation,” including “any amount includible in income with respect to the granting after February 28, 2010, of service recipient [employer] stock (within the meaning of section 409A) that, upon such grant, is subject to a substantial risk of forfeiture (as defined under section 83(c)(1)) for at least 5 years from the date of such grant.” In other words, stock options, restricted stock and certain other stock-based compensation granted after February 28, 2010 with at least a 5-year vesting schedule will be excluded from the definition of “excess employee compensation.”
Thus, to the extent companies want to ensure that their pension funding obligations are minimized, they could adopt 5-year vesting for equity awards to ensure they are excluded from the definition of “excess employee compensation” for purposes of the funding requirements.
Here’s a link to the status page with a copy of the enrolled act as passed by House and Senate:
http://www.thomas.gov/cgi-bin/query/z?c111:H.R.3962:
Updated 7/15/2010: Clarified that the “excess employee compensation” and additional funding provisions only apply to companies that take advantage of the pension funding relief provided by the Act.
