This post comes to us from John J. Cannon, a partner in the Executive Compensation and Employee Benefits Group Shearman & Sterling LLP, and is based on a Shearman & Sterling Client Publication.
With enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act, mandatory say-on-pay has become federal law. [1] Say-on-pay under the Reform Act requires significant preparation on the part of issuers and their boards of directors and is one step in what we anticipate will be a long and ongoing dialogue with investors about compensation. The requirement is effective for shareholder meetings held on or after January 21, 2011.
The Reform Act and Say-on-Pay
Say-on-pay refers to a shareholder advisory vote on the compensation of an issuer’s named executive officers. Say-on-pay has been a focus of shareholder advocates and the frequent subject of shareholder proposals on executive compensation for several years. [2] Prior to the Reform Act, a number of legislative proposals included a say-on-pay requirement and, in 2009, mandatory say-on-pay became the rule for participants in the Troubled Asset Relief Program.