By Cydney Posner

As you probably know, in mid-December, the House passed the 1279-page ‘‘Wall Street Reform and Consumer Protection Act of 2009.''  Whether it will ultimately pass in the Senate and be signed into law, and, if so, what form it will ultimately take, remains to be seen. While it encompasses a significant effort to reform the financial sector, it also contains some fairly choice morsels applicable to public companies generally, including the following:

SECTION 2002  SAY-ON-PAY

  • Requires an annual non-binding say-on-pay "advisory vote" applicable to compensation of the NEOs as disclosed in the proxy, including the compensation committee report, CD&A, compensation tables and any required related materials
  • Requires a separate non-binding advisory vote on golden parachute understandings or arrangements for NEOs in any proxy in which shareholders are asked to approve a business combination transaction, including a requirement for disclosure of the aggregate total amount payable and applicable conditions
  • Allows SEC to exempt categories of public companies, such as smaller companies
  • Requires institutional investment managers to report at least annually how they voted on these matters
  • Requires SEC to issue rules on this topic

SECTION 2003  COMPENSATION COMMITTEE INDEPENDENCE

  • Requires that each member of the compensation committee of the board (or if there is no committee, the independent members of the board) be independent, meaning that, at a minimum, the member may not, other than in his or her capacity as a member of the board or a board committee, accept any consulting, advisory or other compensatory fee from the issuer
  • Requires any compensation consultant or other similar adviser to the compensation committee to meet standards for independence established by the SEC
  • Requires the committee to have the authority, in its sole discretion, to retain and obtain the advice of (although it need not follow that advice) a compensation consultant, counsel and other advisors meeting the SEC's independence standards (to be funded by issuers)
  • Requires the committee to be directly responsible for the appointment, compensation, and oversight of the work of the consultant, counsel and other advisors
  • Requires proxy disclosure as to whether the committee retained and obtained the advice of a compensation consultant meeting the independence standards
  • Allows SEC to exempt certain types of relationships and categories of public companies, such as smaller companies
  • Requires SEC to conduct a study and review of the use of independent compensation consultants
  • Requires the SEC to direct SROs to adopt rules related to above

SECTION 7606  EXEMPTION FOR NON-ACCELERATED FILERS

  • Amends SOX 404 to exempt non-accelerated filers from the requirement to obtain and file an auditors' attestation report on internal control over financial reporting (SOX 404(b)), but leaves the 404(a) management's assessment report intact
  • Requires the SEC to conduct yet another study on how to reduce the burden of compliance with SOX 404(b)

SECTION 7610  AUDITING OVERSIGHT BOARD

  • Changes the name of the ‘‘Public Company Accounting Oversight Board'' (PCAOB) to ‘‘Auditing Oversight Board'

This content is provided for general informational purposes only, and your access or use of the content does not create an attorney-client relationship between you or your organization and Cooley LLP, Cooley (UK) LLP, or any other affiliated practice or entity (collectively referred to as "Cooley"). By accessing this content, you agree that the information provided does not constitute legal or other professional advice. This content is not a substitute for obtaining legal advice from a qualified attorney licensed in your jurisdiction, and you should not act or refrain from acting based on this content. This content may be changed without notice. It is not guaranteed to be complete, correct or up to date, and it may not reflect the most current legal developments. Prior results do not guarantee a similar outcome. Do not send any confidential information to Cooley, as we do not have any duty to keep any information you provide to us confidential. When advising companies, our attorney-client relationship is with the company, not with any individual. This content may have been generated with the assistance of artificial intelligence (Al) in accordance with our Al Principles, may be considered Attorney Advertising and is subject to our legal notices.