SEC Approves Say-On-Pay

The SEC has approved rules that give shareholders the right to an advisory vote on pay at annual meetings.

The proposals, which stem from last year’s Dodd-Frank Act, were passed by three votes to two this morning and will be effective for this year’s AGM season.

Smaller companies – defined by the SEC as having a market cap under $75 mn – will be exempt from holding a say-on-pay vote until 2013.

The two SEC commissioners who dissented, Kathleen Casey and Troy Paredes, did so in part because they wanted smaller companies to be permanently exempt from the rules.

Companies do not have to follow the recommendation of an advisory vote, but they will have to explain how the result influences later decisions on executive pay.

Under the rules, a say-on-pay vote must take place at least once every three years, and companies must vote at least once every six years on how often advisory votes on pay occur.

Shareholders will also get an advisory vote on so-called ‘golden-parachute’ payments that occur during mergers and acquisitions.

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