By Cydney Posner

Here is the Frank bill, the Corporate and Financial Institution Compensation Fairness Act of 2009, published by the GPO. The bill, passed by the House on Friday, contains non-binding say-on-pay provisions (including approval provisions specifically addressing golden parachutes), as well as provisions authorizing regulators to limit incentive compensation payable to a broad range of financial institutions with assets over $1 billion. (Bets on whether this last provision survives?) Several points are of particular interest. First, although the general public discourse has assumed effectiveness for the 2010 proxy season, that timing now appears unlikely: under the bill, the SEC has six months to issue final rules, and then the say-on-pay requirement would be effective for annual meetings six months after the date on which final rules were issued. It seems unlikely that the Senate bill would accelerate that schedule. The bill also specifically contemplates that the SEC may exempt smaller reporting companies from the say-on-pay requirement. In addition, the bill requires that any compensation consultant or other similar adviser to the compensation committee must meet standards for independence established by the SEC. Any regulations the SEC adopts regarding compensation consultants must be "competitively neutral among categories of consultants." The specific provision requiring that the committee have counsel that also meet those independence standards has been deleted; however, the bill still contains provision requiring that the committee have authority "to retain and obtain the advice of independent counsel and other advisers meeting the standards for independence" promulgated for compensation consultants and other similar advisers. Finally, the definition of "independent" for purposes of membership on the compensation committee has been narrowed to not accepting "any consulting, advisory, or other compensatory fee from the issuer" and also provides the SEC with discretion to exempt certain relationships. As a result, if this form is retained, the definition of compensation committee independence would be less restrictive than that applicable to audit committee members, who are also prohibited from being affiliates of the issuer.

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