• Say-on-Pay Bill
  • August 31, 2009 | Author: Chad C. Almy
  • Law Firm: Troutman Sanders LLP - Atlanta Office
  • Rep. Frank has been responsible for introducing other employment-related legislation as well. On July 31, 2009, hours before breaking for a month-long summer recess, the House passed Rep. Frank's Corporate and Financial Institution Compensation Act of 2009 (H.R. 3269), which is better known as the “Say-on-Pay” Bill, by a largely party-line vote of 237-185. If passed in the Senate later this Fall, the bill could produce sweeping changes in the way public companies compensate their executives, largely because these covered companies would be required to hold an annual shareholder advisory vote on executive compensation and “golden parachutes.” “Golden parachutes” are defined by the bill as any compensation that is based on the acquisition, merger, consolidation, or sale of a company. The bill would also require institutional investors, such as hedge funds, mutual funds, and private equity groups, to publicly report their votes under the Act.

    Additionally, the bill would require all financial institutions with more than $1 billion in assets to disclose all compensation structures for all employees that contain any incentive based elements. In light of these disclosures, the bill mandates the creation of new federal regulations that would prohibit pay structures that “could threaten the safety and soundness of covered financial institutions; or could have serious adverse effects on economic conditions or financial stability.” No further guidance was provided in the text of the bill as to what specific prohibitions might be included in these new regulations.

    The Senate is expected to address the “Say-on-Pay” Bill when it reconvenes after Labor Day.