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Morrison 23 Foerster

Say-On-Pay

Companies must include a resolution in − their proxy statements asking shareholders to approve, in a non-binding vote, the compensation of their named executive officers

A separate resolution will be required to − determine whether the Say-on-Pay vote takes place every one, two, or three years

To the extent that any “golden − parachute”-related compensation is not approved as part of a Say-on-Pay vote, a separate non-binding vote will be required to approve that compensation in the event of a merger or similar extraordinary transaction

The proxy statement for a meeting − involving a “Say-on-Golden Parachute” vote would need to include “clear and simple” disclosure of the golden parachute arrangements or understandings and the amounts payable

Compensation Committee and Adviser Independence

Stock exchanges must adopt listing − standards providing that the members of the compensation committee meet enhanced independence standards comparable (but not identical) to what is required for audit committee members under the Sarbanes-Oxley Act

New listing standards will prescribe that − a compensation committee may only select compensation consultants, legal counsel, or other advisers after taking into consideration independence standards established by the SEC

Enhanced disclosure is required regarding − the use of compensation consultants and any conflicts of interest

Enhanced Compensation Disclosure

Disclosure is required of the relationship − of the compensation actually paid to

executives versus the company’s financial performance

Companies must disclose the median − annual total compensation of all employees (except the CEO), the annual total compensation of the CEO, and the ratio of the median employee total compensation to the CEO total compensation

Disclosure is required of whether any − employee or director (or designee of such persons) is permitted to purchase financial instruments designed to hedge their equity securities

Clawbacks

Stock exchanges must adopt standards − requiring that listed companies develop and implement policies providing for the recoupment of compensation in the event of an accounting restatement

Enhanced disclosure will be required of − a company’s policy on incentive-based compensation that is based on financial information required to be reported under the securities laws

Other Governance Provisions

The Act authorizes the SEC to promulgate − rules allowing certain shareholders to include director nominees in the company’s proxy materials, but does not prescribe specific standards for those rules

Disclosure is required of the reasons why − the company has chosen to have one person serve as Chairman and CEO, or to have different individuals serve in those roles

Brokers are not permitted to use − discretionary authority to vote proxies in connection with election of directors, executive compensation, or other significant matters as determined by the SEC