BR&B Explains the SEC’s New Say-On-Pay Rules

1/28/2011 - The United States Securities and Exchange Commission (“SEC”) recently adopted new rules governing “say-on-pay” advisory votes on executive compensation, “frequency” votes to determine the frequency of future “say-on-pay” votes by shareholders, and shareholder votes on “golden parachute” agreements, as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Under Dodd-Frank and the SEC’s new rules, companies subject to the federal proxy rules must now hold say-on-pay advisory votes for shareholders about executive compensation at least once every three years beginning with the first annual shareholders’ meeting taking place on or after January 21, 2011. When holding these votes, the new SEC rules require these companies to inform shareholders whether the vote is non-binding and whether companies have considered the results of the most recent say-on-pay vote and whether the company took any action in response. The SEC’s rules also will now require companies to schedule “frequency votes” to allow shareholders to vote on how often they would like to be presented with the opportunity to vote on executive compensation. The non-binding, advisory “frequency votes” must occur at least once every six years. The rules require that after it holds a “frequency vote,” the company must issue a current report on Form 8-K disclosing how often the say-on-pay votes will be held.

The SEC adopted a temporary exemption from the new rules for smaller reporting companies that have less than $75 million in public float. These companies are not required to conduct say-on-pay and frequency votes until annual meetings occurring on or after January 21, 2013.

The new rules also require all public companies to provide a separate shareholder advisory vote to approve “golden parachute” arrangements with certain executive officers in connection with mergers, acquisitions, consolidations, proposed sales, or other dispositions of all or substantially all of the company’s assets. This requirement does not apply to companies that have included the golden parachute arrangements in an earlier say-on-pay vote. The rules also require companies to provide additional disclosures regarding such golden parachute agreements in proxy statements and related schedules and forms. The new golden parachute rules go into effect for proxy materials filed on or after April 25, 2011.

BR&B will continue to monitor SEC rulemaking on this important topic. If you have any questions about the new SEC rules, please contact Jeffrey W. Golan (at 215/963-0600 or via email at or Lisa M. Lamb (at 215/963-0600 or via email at