• Dodd-Frank and Executive Compensation - Part 1: Status Update
  • June 17, 2016
  • Law Firm: Mintz Levin Cohn Ferris Glovsky Popeo P.C. - Boston Office
  • It’s been over five years since the signing of the Dodd-Frank Wall Street Reform and Consumer Act (“Dodd-Frank”) and we are still waiting for the U.S. Securities and Exchange Commission to finalize rules on several provisions related to executive compensation. Below is a summary of the current landscape of Dodd-Frank as it relates to key executive compensation provisions. Over the coming months, we will be posting a series of blog posts addressing some of the nuances of these provisions. Stay tuned for more.

    Provision

    Summary

    Status of Rulemaking

    Pay Ratio Disclosure

    Requires disclosure of the ratio between the compensation of the company’s median employee and the CEO

    Final *Disclosure required for first fiscal year beginning on or after January 1, 2017 (i.e,. 2018 proxy statements)

    Say on Pay

    Requires companies to hold shareholder advisory votes on executive compensation along with votes on how often to conduct such say on pay votes

    Final *Currently Effective

    Say on Golden Parachutes

    Requires disclosure of and a shareholder advisory vote for any “golden parachute” payments in a transaction where shareholder approval is sought

    Final *Currently Effective

    Compensation Committee Independence

    Requires enhanced independence standards for compensation committee members along with specific disclosure requirements

    Final *Currently Effective

    Compensation Committee Advisors

    Requires compensation committees to evaluate the independence of consultants and advisors

    Final *Currently Effective

    Clawbacks

    Requires companies to develop policies to recover incentive compensation that was awarded based on erroneous financial information

    Proposed

    Hedging Policy Disclosure

    Requires disclosure of whether the company allows employees and directors to engage in certain hedging transactions

    Proposed

    Pay-versus-Performance Disclosure

    Requires disclosure of the relationship between executive compensation actually paid and company financial performance (i.e., TSR)

    Proposed

    Financial Institution Incentive Compensation

    Requires disclosure of incentive compensation and a prohibition on certain arrangements that encourage inappropriate risk taking

    Proposed (joint-rulemaking between the SEC and several other agencies) *New proposed rules were issued on April 21, 2016 and can be found here.


    For the full text of the Securities and Exchange Commission proposed/final rules and the corresponding rules adopted by the securities exchanges and then on the “Executive Compensation” link in the Mandatory Rulemaking Provisions section.