The Securities and Exchange Commission (SEC) has published a chart outlining when it intends to issue new rules implementing sections of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”). (pdf) Notably, within the next six months, the SEC plans to issue a final rule implementing Section 952 of the Dodd-Frank Act, which requires the SEC to adopt new disclosure rules for companies to report the use of compensation consultants and potential conflicts of interest. In addition, this section of the Act directs national securities exchanges/associations (e.g., NYSE, NASDAQ) to establish listing standards requiring publicly traded companies to have their compensation committee participants be members of the board of directors and meet a heightened standard of independence in order for their shares to continue trading on those exchanges. The SEC issued a proposed rule governing § 952 in March 2011. According to the SEC outline, the agency also plans to adopt the listing standards within a six-month timeframe.
The SEC also intends to issue a proposed rule governing various pay disclosures under Sections 953 and 955 of Dodd-Frank, and a proposal regarding the recovery of certain executive compensation – commonly referred to as “claw-back” policies – under Section 954. Specifically, Section 953 of the Act requires that certain covered entities disclose to the SEC various compensation matters including pay-for-performance policies and the ratio between the CEO’s total compensation and the median total compensation for all other company employees. Section 955 mandates additional disclosures regarding whether directors and employees are permitted to hedge any decrease in market value of the company’s stock. Section 954, the claw-back provision, prohibits exchanges from listing the securities of a company that has not developed, implemented and disclosed a policy relating to the recoupment of incentive-based compensation when that compensation was based on performance criteria of reported financials and the company restates its financials due to material noncompliance with financial reporting requirements.
According to the SEC chart, the agency aims to issue final rules on these provisions by the end of 2012.
In January of 2011, the SEC adopted a final rule governing shareholder approval of executive compensation and “golden parachute” compensation arrangements required under Dodd-Frank. For more information on these and other corporate governance provisions set forth in the Dodd-Frank Act, see Littler’s ASAP: Executive Compensation and the Wall Street Reform and Consumer Protection Act.
Photo credit: Ramy Majouji