Are you Ready for Say-on-Pay?

On January 25, 2011, the SEC adopted rules to implement the say-on-pay and say-on golden parachute provisions of Section 951 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Smaller Reporting Companies were given a two-year exemption from the rules. As such, smaller reporting companies are not required to provide say-on-pay and say-on-frequency votes until their first annual or other shareholder meeting occurring on or after January 21, 2013.  The delayed compliance was designed to allow smaller reporting companies to observe their larger counterparts comply, and to design their plan for compliance.

So what does this mean for you? Well, for the shareholder meeting, annual or special held after January 21, 2013, you must comply with the following:

Say-on-Pay Vote

If a solicitation is made by an issuer relating to an annual or other shareholder meeting  at which directors will be elected, then the issuer must include a resolution for a Say-on-Pay vote, and that Say-on-Pay vote must occur no later than at the annual or other meeting of shareholders held in the third calendar year immediately preceding the Say-on-Pay vote. This applies to the executive compensation disclosure required to be included in the proxy statement.

Additionally, the SEC requires the issuer to disclose in the proxy statement that it is providing a Say-on-Pay vote, what the general effect of that vote is, and that such vote is non-binding.

Also, in the CD&A, the issuer needs to address whether the issuer have considered the results of the most recent advisory vote on executive compensation in determining compensation policies, and if so, how that consideration has affected the issuer’s compensation decisions and policies.

Say-on Frequency Vote

If a solicitation is made by an issuer relating to an annual or other meeting of shareholders at which directors will be elected, then the issuer must include a resolution for a Say-on-Frequency vote. Such Say-on-Frequency vote must occur no later that the annual or other meeting held in the sixth calendar year thereafter.

This resolution would ask whether shareholders want a Say-on-Pay vote to occur every one, two, or three years.

Additionally, An amendment to Item 5.07 of Form 8-K requires that an issuer must disclose its decision as to how frequently the issuer will conduct Say-on-Pay votes following each Say-on-Frequency vote.

Say-on Golden Parachute Vote

If a solicitation is made by the issuer for a meeting of shareholders at which the shareholders are asked to approve an acquisition, merger, consolidation, or proposed sale or disposition of all or substantially all assets of the issuer, then the issuer must provide a separate shareholder vote to approve any agreements or understandings and compensation disclosed.  However, if such agreements have been subject to a shareholder advisory vote, then separate shareholder vote is not required.

In anticipation of being adequately prepared for your Shareholder meeting for 2013, you should contact counsel.  For the complete rules, click here.

Author: Jennifer Trowbridge, Stoecklein Law Group, LLP

 

This entry was posted in Dodd-Frank Act, Legislation, SEC Publications and tagged , , , , , , , . Bookmark the permalink.

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