As I’m sure my readers know, the Dodd-Frank Act requires public companies to allow shareholders to vote on their executive compensation programs beginning next year. On October 18, the SEC proposed regulations governing how these votes will work, bringing us one step close to the inevitable.

Say-on-Pay Regs Proposed
The regulations require three non-binding votes:

• Say-on-Pay: Shareholders must be permitted to vote on executive compensation every one, two, or three years. The first vote must be held at the company’s first annual meeting on or after January 21, 2011. Shareholders will be voting on the compensation paid to executives as disclosed in the proxy statement.
• Say-When-on-Pay: Shareholders must also be permitted to vote on how frequently the company holds a Say-on-Pay vote. This vote must occur at least every six years, with the first vote at the company’s first annual meeting on or after January 21, 2011.
• Say-on-Parachutes: Shareholders must be permitted to vote on golden parachute arrangements. If these arrangements have not previously been voted on, this vote must be included in the proxy statement relating to the merger (or any similar transaction, such as a sale of the company’s assets) for which the compensation will be paid. In connection with this, the SEC is requiring enhanced tabular disclosure of parachute payments in proxy statements for mergers and similar transactions.

Effective Date

The Say-on-Pay and Say-When-on-Pay votes must be included in the proxy for the first annual meeting on or after January 21, 2011, even if the SEC has not finalized these regulations by then. The Say-on-Parachutes vote is not required until the regulations are finalized.

Non-Binding with a Kick

All of the votes are non-binding, which means the company doesn’t have to abide by them. For the Say-on-Pay vote, however, the proposed regulations require companies to discuss in the CD&A how the vote has been considered in setting executive pay. Likewise, for the Say-When-on-Pay vote, companies must disclose in the 10-Q following the vote whether they intend to comply with it. Woe to those companies that don’t choose to comply; shareholders can then introduce a proposal regarding the frequency of Say-on-Pay votes in the next year’s proxy statement.

More Information

We’ve posted an alert on the proposed regs that includes the memos we are receiving from law firms and compensation consultants; look for even more memos to be posted in the next few days. Check out the excellent summaries by Maslon Edelman Borman & Brand and Morrison & Foerster (co-authored by CompensationStandards.com’s David Lynn).

Conference Audio Available
Are you ready for Say-on-Pay? Make sure with the many sessions on Say-on-Pay offered at this year’s NASPP Conference.  All of the sessions have been recorded and can be downloaded in MP3 format. Purchase just the session(s) you want or save by purchasing a package of sessions.

Free Conference Session Audio If You Renew by Dec 31
All NASPP memberships expire on a calendar-year basis. Renew your membership by Dec 31 and you’ll qualify to receive the audio for one NASPP Conference session for free!

Join Now and Get Three Months Free and Free Conference Session Audio!
If you aren’t currently an NASPP member, now is the time to become one! Join the NASPP for 2011 and you’ll get the rest of 2010 for free.  If that’s not enough, you’ll also get the audio for one NASPP Conference session for free. Tell all your friends!

NASPP “To Do” List
We have so much going on here at the NASPP that it can be hard to keep track of it all, so I keep an ongoing “to do” list for you here in my blog. 

• Purchase the audio for the 18th Annual NASPP Conference.
• Complete the Compliance-O-Meter quiz on Grant Agreements.
• Take the “Question of the Week” challenge.
• Renew your NASPP membership for 2011 (if you aren’t an NASPP member, join today).

– Barbara