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March 2011: Analysis Final Rule on Shareholder Approval of Executive Compensation

March 2011: Analysis Final Rule on Shareholder Approval of Executive Compensation

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Published by SingerLewak
Analysis: Final Rules on Shareholder Approval of Executive Compensation
By Jim Pitrat, CPA - Practice Leader, Assurance & Advisory Pr
Analysis: Final Rules on Shareholder Approval of Executive Compensation
By Jim Pitrat, CPA - Practice Leader, Assurance & Advisory Pr

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Published by: SingerLewak on Apr 26, 2011
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Analysis: Final Rules on Shareholder Approval of Executive Compensation
By Jim Pitrat, CPA - Practice Leader, Assurance & Advisory Practice
TUESDAY, MARCH 1, 2011
Public Company Financial Executive Briefng 
Executive Summary:
The Dodd-Frank Wall Street Reorm and Consumer Protection Act (the Dodd-Frank Act) added Section 14A to the 1934 Act.The Section requires non-binding (i.e., advisory) shareholder votes concerning:1. The approval o executive compensation (say-on-pay)2. The requency o votes on executive compensation3. The disclosure o golden parachute arrangements4. Shareholder advisory vote to approve such compensation arrangementsIn Final Rulemaking Release No. 33-9178, the SEC has adopted rules to implement these provisions.
www.SingerLewak.com | 877.754.4557
The Rules Call for the Following Changes:
 Shareholder Approval of Executive Compensation
Once every three calendar years, issuers must provide or a separate shareholder advisory vote in proxy statements to approvecompensation o named executive ofcers.
•
The vote is required only when proxies are solicited or an annual or other shareholder meeting or which disclosure o executive compensation is requiredRequires the ollowing disclosure in the proxy statement:
•
That a separate vote on executive compensation is being taken
•
The eect o the advisory vote
•
The requency o advisory votes
•
When the advisory vote will take place nextRequires a discussion in Compensation, Discussion, & Analysis (CD&A) o how the entity’s compensation policies and decisionshave taken into account the most recent shareholder advisory vote.
 Shareholder Approval of the Frequency of Shareholder Votes on Executive Compensation
Requires that a separate shareholder advisory vote be taken at least once during the six years to determine whether theshareholder vote on executive compensation will occur every year, every two years, or every three years.
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Requires the ollowing disclosures in the proxy statement:
•
That a separate shareholder vote on the requency o the shareholder advisory vote is being taken
•
The eect o the advisory vote
•
The requency o advisory votes
•
When the advisory vote will take place nextIssuers must present our choices to their shareholders in respect o the requency o advisory votes on executive compensation:every year, every two years, every three years, or to abstain rom voting.Shareholder advisory votes on executive compensation do not trigger the need to fle a proxy statement in preliminary orm.Item 5.07 o Form 8-K, “Submission o Matters to a Vote o Security Holders,” has been amended to require disclosure o (1)votes concerning the requency o shareholder advisory votes, disclosure o the number o votes cast or each o the ollowingchoices: every year, every two years, every three years, and abstentions, and (2) disclosure o the company’s decision regardinghow requently it will conduct advisory votes on executive compensation.
Disclosure of Golden Parachute Arrangements
Item 402(t) has been added to Regulation S-K to require disclosure in any proxy or consent solicitation to approve an acquisition,merger, consolidation, or proposed sale o substantially all o the entity’s assets o the aggregate golden parachute compensationthat may be paid to a named executive ofcer.
•
Both tabular and narrative disclosures are required.
•
The required table is titled “Golden Parachute Compensation” and includes the ollowing columns covering eachexecutive ofcer:
•
Column (a) includes each named executive ofcer
•
Column (b) includes cash severance payments
•
Column (c) includes the dollar value o accelerated stock awards, in-the-money options or which vesting would be accelerated,and payments in cancellation o stock and option awards
•
Column (d) includes pension and nonqualifed deerred compensation beneft enhancements
•
Column (e) includes perquisites and other personal and health and welare benefts
•
Column () includes tax reimbursements
•
Column (g) includes additional elements o compensation not specifcally includable in the other columns o the tableThe new rules also calls or narrative disclosure o:1. Material obligations (or conditions) applicable to the receipt o payment by a named executive ofcer (items such as non-competition, non-solicitation, non-disparagement, or confdentiality agreements)2. The specifc circumstances triggering payment3. The orm o the payment (e.g., lump-sum or installments)4. The paying party5. Any material actors in respect o each agreement
 Approval of Golden Parachute Compensation
A separate advisory vote is not required on golden parachute compensation i disclosure o such compensation has beenincluded in the executive compensation disclosure that was subject to a previous advisory vote, otherwise, a golden parachutecompensation vote is required.
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Name Cash EquityPensionNQDCPerquisites/Benits TaxReimbursement Other Total(a) (b) (c) (d) (e) (f) (g) (h)

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