The SEC May Expand Compensation and Governance Disclosure for 2010 Proxy Season

The SEC May Expand Compensation and Governance Disclosure for 2010 Proxy Season

 
The SEC recently released new proposed rules concerning compensation and corporate governance disclosure for public company proxy statements and other filings. This Emerging Issues Analysis provides a summary of the key components of the proposed rule changes and the SEC's comment requests relating to executive compensation disclosure, as well as practical guidance for public companies preparing for the 2010 proxy season.
 
Excerpt:
 
The SEC proposes requiring enhanced disclosure in four main areas:

Enhanced Compensation Disclosure. The SEC's proposal would require companies to disclose how overall compensation policies and practices for employees generally create incentives that can materially affect the company's risk and management of that risk. In addition, the proposal would reverse the "December surprise" and require companies to disclose the value of stock options and stock awards for named executive officers based on the aggregate grant date fair value of awards granted during the year, rather than based on the value recognized during the year for financial statement reporting purposes. Finally, the proposal would require companies to disclose fees paid to compensation consultants and their affiliates if the compensation consultant or affiliates have provided additional services to the company.

Enhanced Director and Nominee Disclosure. The SEC's proposal would require companies to disclose director and nominee experience, qualifications, attributes or skills that the company or other proponent believes qualify that director or nominee to serve on the board of directors and as a member of a board committee on which the director serves, in light of the company's business and structure. In addition, companies would disclose all public company board membership held by a director or nominee at any time during the past five years, rather than only current board memberships. Finally, the "look back" period for required disclosure of legal proceedings involving directors, nominees and executive officers would be extended from five to ten years.

New Governance Disclosure. The SEC's proposal would require companies to disclose the board's leadership structure, including whether the board has chosen to combine or separate the chairman and CEO positions, the reasons for those decisions, whether the board has a lead independent director and the duties of the lead independent director. In addition, companies would also disclose the board's role in the company's risk management process and the effect this involvement has on the company's leadership structure.

Accelerated Reporting of Shareholder Voting Results on Form 8-K. The SEC's proposal would require companies to disclose shareholder voting results on a Form 8-K, rather than on the Form 10-Q for the quarter in which the shareholder meeting was held (or Form 10-K for the fourth quarter).
 
 
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