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Taking Charge of Executive Compensation

by Yoko Goto
Eyes On Wall Street |

The SEC has finally issued much-anticipated proposed rules regarding executive compensation.

On March 30, 2011, the SEC unanimously proposed rules directing the national securities exchanges to adopt certain listing standards related to the compensation committee of a company's board of directors as well as its compensation advisers pursuant to the requirements set forth in section 952 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

The proposed rules require the exchanges to adopt listing standards that 1) require each member on a compensation committee be a member of the board of directors and be independent; and 2) provide that compensation committee has the authority to retain compensation advisers and is responsible for the appointment, compensation and work of any such adviser.

The proposed rules also require each company to disclose in its proxy material for an annual meeting of shareholders 1) whether its board's compensation committee retained or obtained the advice of a compensation consultant, and 2) whether the work of the compensation consultant has raised any conflict of interest and, if so, the nature of the conflict and how the conflict is being addressed.

Once an exchange's new listing standards are in effect, a listed company will be required to meet these standards in order for its shares to continue to be traded on the exchange. Comments to the proposed amendments are due on or before April 29, 2011.