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The SEC has updated its schedule for implementation of the remaining executive compensation-related provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”). Importantly, the new timeline delays the SEC rule-making. As a result, we expect that these provisions will not apply during the 2012 proxy season.
New SEC Compensation-Related Rulemaking Schedule
As background, for Dodd-Frank to be implemented the SEC needs to develop rules governing several aspects of the legislation impacting executive compensation. The list below provides a summary of the current planned timing of when rules will be issued.
January – June 2012 (Planned)
- §952: Adopt exchange listing standards regarding compensation committee independence and factors affecting compensation adviser independence; adopt disclosure rules regarding compensation consultant conflicts
- §953, §955: Propose rules regarding disclosure of pay-for-performance, pay ratios, and hedging by employees and directors
- §954: Propose rules regarding recovery of executive compensation (clawback policies)
July – December 2012 (Planned)
- §952: Report to Congress on study and review of the use of compensation consultants and the effects of such use
- §953, §955: Adopt rules regarding disclosure of pay-for-performance, pay ratios, and hedging by employees and directors
- §954: Adopt rules regarding recovery of executive compensation (clawback policies)
The delay in the SEC’s rulemaking schedule pushes implementation of the pay-for-performance and pay ratio disclosure aspects of Dodd-Frank to the 2013 proxy season. However, 2012 will likely still be a busy year for both management and compensation committees in implementing new aspects of Dodd-Frank as final rules become available. The implementation of Say on Pay votes in 2011 (Dodd-Frank §951) has already been a catalyst for change, and we expect many of the new rules to lead to meaningful changes to executive compensation programs in 2012-13, including those related to governance and disclosure.