Washington’s focus on changing the rules regarding executive compensation continues with the recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act. Set forth below is a discussion of certain executive compensation provisions of the Act and some recommended action items.

Say-on-Pay

The Act requires that companies include in their annual proxy statement a non-binding resolution seeking shareholder approval of named executive officer compensation at shareholder meetings at least once every three years, and mandates a separate vote to determine how often the say-on-pay vote will be held (every one, two or three years), with such separate vote to be held at least once every six years. The frequency vote represents a welcome departure from earlier drafts of the bill, which required an annual say-on-pay vote. As discussed in our memo of September 30, 2009 (available on the Forum here, triennial say-on-pay votes more closely align sayon- pay with the goal of avoiding short-termism in corporate governance and executive pay arrangements than do annual say-on-pay votes. We therefore recommend that most companies seek to implement a triennial approach. Targeted shareholder outreach, shareholder surveys regarding executive compensation and effective use of the compensation disclosure and analysis section of the proxy can be part of the arsenal of effective shareholder communication in connection with the say-on-pay vote and the frequency vote. Companies should be cognizant of (although not unduly deferential to) voting policies of institutional shareholders and proxy advisory services for say-on-pay, given that these groups may recommend withhold/against votes on the re-election of directors if concerns raised through say-on-pay votes are not adequately addressed.

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