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Program Reference - The Advisors' Blog, February 25, 2009 posting


The Advisors' Blog

February 25, 2009

Corp Fin Issues "Say-on-Pay" Guidance: Slim Pickings

- Broc Romanek,

Late yesterday, Corp Fin issued this set of "American Recovery and Reinvestment Act of 2009" CD&Is, which contain three Q&As regarding how to implement the "say-on-pay" provision of ARRA. Unfortunately, these Compliance and Disclosure Interpretations don't answer many of the questions we have been hearing. The three Q&As boil down to:

- Say-on-pay only applies to shareholder meetings at which directors are to be elected
- Addresses how the rules apply to smaller reporting companies that are not subject to CD&A disclosure requirements
- Notes that "a company that determines to comply" must file a preliminary proxy statement - and you should contact the Assistant Director of your industry group if that causes timing problems (for me, this begs the question - how can a company determine not to comply?)

As for the effective date of Section 7001 of ARRA (which amends Section 111 of EESA), the CD&Is are semi-silent; they just note Senator Dodd's letter that I blogged about recently, which states his views about the effective date. I'm not sure how much precedential weight to put on a letter from a Senator. Does it get bolstered by a mention from the Staff? Do they teach this stuff in law school now-a-days (e.g. a Senator letter is bigger than a bread basket, but smaller than a Conference Report; yes, I'm feeling cheeky today)?

The third Q&A suggests that there is some other way to comply with Section 111(e)(1) - could a company possibly just include a shareholder proposal that asks a company to adopt say-on-pay? Probably not. There are lots of open issues and we may have to wait until the SEC conducts its required rulemaking under Section 7001 until we have firm answers.

For the academics out there, it could be interpreted that Section 7001(h) allows Treasury to adopt say-on-pay regulations to fill in the gap before the SEC adopts rules under Section 7001(f)(3)(under which the SEC has one year to adopt rules). Unlikely, but anything is possible...


Posted by broc at February 25, 2009 07:03 AM



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