ASAP
"Say-on-Pay" Bill Advances in House
With regard to shareholder approval, the shareholders’ annual vote would be non-binding on the corporation or board of directors, and “shall not be construed as overruling a decision by such board, nor to create or imply any additional fiduciary duty by such board.”
As noted above, in addition to mandating a shareholder approval vote, the bill, known colloquially as the “Say-on-Pay” bill, directs appropriate federal agencies to establish regulations requiring covered financial institutions to disclose the structures of their incentive-based compensation arrangements “sufficient to determine whether the compensation structure--
(1) is aligned with sound risk management;
(2) is structured to account for the time horizon of risks; and
(3) meets such other criteria as the appropriate federal regulators jointly may determine to be appropriate to reduce unreasonable incentives for officers and employees to take undue risks that--
(A) could threaten the safety and soundness of covered financial institutions; or
(B) could have serious adverse effects on economic conditions or financial stability.”
After the above information on compensation is provided, federal regulators would draft regulations prohibiting the regulated financial institutions from awarding their executives with these compensation arrangements or incentive-based payments that are deemed to encourage such risky behavior.
The financial institutions covered by the preceding provisions include: depository institutions or depository institution holding companies, broker-dealers, credit unions, investment advisors, and any other financial institution that the appropriate federal regulators determine should included.
The entire House of Representatives is expected to consider the bill as early as Friday.