Charles M. Nathan is a corporate partner at Latham & Watkins LLP and Global Co-Chair of the firm’s Mergers and Acquisitions Group.This post comes is based on a Latham & Watkins LLP client memorandum by James D.C. Barrall, Bradd L. Williamson and Allegra C. Wiles.
Policy Drivers in the Current Environment — As public companies, Boards and Compensation Committees begin to make year-end 2009 compensation decisions, draft proxies for their 2010 shareholder meetings and design 2010 executive compensation plans, they face many challenges caused by the uncertain economic environment, limited visibility for future business prospects, public anger over executive compensation and increased activity by proxy advisors, institutional shareholders and corporate activists, as well as looming legislative and regulatory changes aimed at executive compensation and related corporate governance.
TARP Participants and Banks — The more than 300 TARP participants are dealing with stringent new compensation limits imposed by Kenneth Feinberg, the Special Master for TARP Executive Compensation. All banks regulated by the Federal Reserve (the Fed) will be required to review their incentive compensation arrangements and governance processes relative to risk under the Fed’s unprecedented pay guidelines and review policies.
Other Companies — For companies outside of TARP and the financial sector, thankfully there is now a lull in the storm over executive compensation which gives them an opportunity to survey the scene and take deliberate steps to review compensation programs and improve governance processes heading into 2010 and also plan for the likely “say on pay” vote in 2011.