Annette L. Nazareth of Davis Polk & Wardwell LLP nicely summarizes the provisions of the Restoring American Financial Stability Act of 2010 that passed the Senate in her post on the Harvard Law CorpGov blog, Senate Bill Passes with Broad Corporate Governance and Compensation Provisions, 5/21/10.
- Listing exchanges would be required to impose a majority vote standard in uncontested director elections for all listed companies, reverting to the plurality standard in contested elections.
- Authorizes the SEC to prescribe rules permitting shareholders to include their own director nominations in issuer proxy solicitation materials. (proxy access)
- Within six months after enactment, any proxy statement that requires compensation disclosure must include an annual nonbinding vote to approve executive compensation as disclosed under Item 402 of Regulation S-K.
- Requires exchanges to adopt standards requiring listed companies to have policies enabling the recovery of incentive-based compensation (including stock options awarded as compensation) from current or former executive officers following a restatement.
- Listing exchanges would also be directed to impose additional independence requirements on the compensation committee, taking into account consulting, advisory and other compensatory fees and affiliate status.
- Listing exchanges must prohibit broker discretionary voting in connection with the election of directors, executive compensation or any other significant matter, as determined by the SEC.
- All publicly traded nonbank financial companies that are supervised by the Board of Governors of the Federal Reserve System must have a risk committee, and all publicly traded bank holding companies with assets over $10 billion would be required to have a risk committee.
- Requires further disclosure of the link between compensation and performance, employee and director hedging, and excessive compensation at certain financial institutions.
Its the bill everything we’d like? Not by a long-shot. Hopefully, we can come back and fill in some of the gaps later. (see Bonfire of the Loopholes, NewsWeek, 5/21/10; Frank to chair financial reform committee, Reuters, 5/24/10; and a comparison of the Frank and Dodd bills by Weil, Gotshal & Manges LLP, 5/24/10)