On June 10, 2009, the Treasury Department announced its support for "Say on
Pay" legislation to authorize the Securities and Exchange Commission to require
annual non-binding shareholder votes on compensation at all publicly traded
companies. Online copies are available
Geithner’s statement, the U.S. Department of Treasury’s
“Say on Pay” Fact Sheet and the
Providing Compensation Committees New Independence fact sheet.
These new rules - and the Administration's desire to legislate and regulate
in this arena - will greatly affect how every publicly traded company does
business by "bringing compensation practices more tightly in line with the
interests of shareholders and reinforcing the stability of firms and the
financial system", according to Treasury Secretary Geithner.
The Administration believes that "Say on Pay" votes by shareholders will
achieve five goals:
- First, compensation plans should properly measure and reward
- Second, compensation should be structured to account for the time
horizon of risks.
- Third, compensation practices should be aligned with sound risk
- Fourth, golden parachutes and supplemental retirement packages should be
reexamined to align the interests of executives and shareholders.
- Fifth, transparency and accountability in the process of setting
compensation should be promoted.
These goals will be promoted both through legislation and regulation, and
will build on Sarbanes-Oxley to regulate corporate behavior. The
Administration's proposal will affect all publicly traded companies - not just
those that participate in the so-called "TARP" program and were required to
allow “say on pay” votes by shareholders this year.
Unless your voice is heard and heeded, major changes to corporate governance
will be implemented in ways that will greatly affect how your company operates
and how your executives are compensated.
McGuireWoods LLP and
McGuireWoods Consulting stand ready to
assist you to comment upon the proposed legislation and any related SEC rules
and to assist you in preparing to respond to the major changes in corporate
governance that they would bring to corporate America.