Haynes and Boone's Newsroom

New Shareholder Voting and Transparency Rules for Executive Compensation
10/29/2009
Greta E. Cowart

2008 and 2009 have brought significant proposals for change both legislatively and on the regulatory front that will impact corporate governance, executive compensation and disclosure for years to come. The elimination of broker voting of shares failing to provide instruction will unsettle votes management had previously counted on for support at the same time that numerous bills providing for “say on pay” and “say on change in control pay” are progressing through Congress. While the SEC has deferred action on the proposal for shareholder access to proxy nominations until next year, at least one legislative proposal is considering a similar change. While the traditional voting base for corporate management has been unsettled raising questions regarding facing “say-on-pay” votes, at the same time there are increased pressures on executive compensation politically, legislatively and via proposed regulation. New proposed disclosures on executive compensation, compensation consultants and counsel will test compensation committees’ abilities in setting appropriate pay and preserving incentives. New disclosures and opportunities for shareholder input will add new risks related to the disclosures and to the consummation of transactions. The new disclosures required for transactions will also present new risks for allegations related to the adequacy and accuracy of such disclosures in addition to the transaction when shareholders voice their disagreement with the change in control pay via defeating the transaction.

This paper outlines the risks to registrants and those for compensation committees. To read the full article, click on the PDF below.