03/08/2010 03:24:00 PM EST
Congressional Action: Executive Pay
By Ryan Glant, J. Sue Morgan, Stewart M. Landefeld, and Evan S. Reynolds
In this Emerging Issues
commentary, the Perkins Coie attorneys discuss the Corporate and Financial Institution Compensation Fairness
Act of 2009. This proposed legislation requires all publicly traded companies to
seek a nonbinding "say-on-pay" vote of shareholders on executive compensation
packages annually and in acquisition transactions. New independence standards
for compensation committees would also be created by this bill. They
write:
"The legislation is now before
the Senate, which reconvenes this week after the congressional August recess.
Although a similar bill passed the House last year but failed to gain Senate
approval, many observers believe that some form of this legislation will be
enacted this year."
"Although say-on-pay votes will
not bind compensation committees, failure to win shareholder support could be
interpreted as a vote of 'no confidence' in a public company's executive
compensation program and its leadership."
"Although existing listing
standards and SEC rules address compensation committee independence and
disclosure about the use of compensation consultants, the proposed legislation
could require companies to change existing consulting relationships. A
compensation committee should review whether its current consultant provides
broader services to the company, or if other relationships with management could
preclude continued service to the committee under independence standards that
may be adopted by the SEC."