Updated SEC Guidance on "Say-on-Pay"

February 26, 2009

Authored by: Robert Klingler

On February 26, 2009, the SEC updated its Compliance and Disclosure Interpretations on the American Recovery and Reinvestment Act to explicitly state that the SEC agrees with the views expressed in Senator Dodd’s letter to Chairman Schapiro.  As a result, the SEC’s position is that all public companies that have received TARP Capital funds must offer shareholders a non-binding vote on executive compensation this year (unless a preliminary or definitive proxy was filed before February 17, 2009), and must submit a preliminary proxy for SEC review prior to mailing the proxy statement to its shareholders.

The revised SEC interpretations also make clear that the TARP recipients are required to provide the shareholder vote regardless of whether a shareholder has requested such a vote, and may not satisfy the requirement by simply asking shareholders to vote on a policy to hold such votes going forward.