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Dodd-Frank and Executive Compensation - Part 1: Status Update

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, click here and then on the “Executive Compensation” link in the Mandatory Rulemaking Provisions section.

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Alexander K. Song is a Mintz Associate whose practice focuses on all aspects of executive compensation, including drafting of equity and incentive compensation plans and award agreements. Alex also handles employment, change-in-control, and severance arrangements for executive officers.