The Dodd-Frank Act, which was signed into law on July 21, 2010, requires regulators from 21 agencies to issue 400 final rules. Through October 3, 2011, 64 rules are finalized and regulators missed deadlines for 126 rules. What does this mean for public companies?
Not much. As of October 3, regulators had finalized approximately 16% of the rules required under the Act, up from 10% as of our Summer 2011 Newsletter, including the new whistleblower rules. The log jam is expected to continue as the SEC recently saw the departure of two senior officials: James Brigagliano, Deputy Director of the Division of Trading and Markets, and John Walsh, Associate Director and Chief Counsel in the Office of Compliance Inspections and Examinations, both of whom were significantly involved in the rulemaking process.
Rulemaking Through October 3, 2011:
The SEC has indicated the following executive compensation related rules previously scheduled for final adoption in the second half of 2011 have been delayed until the first half of 2012:
- Disclosure of “pay vs. performance,” CEO-employee pay ratios and hedging by employees and directors
- Executive compensation “clawbacks”
Despite this backlog, public companies should continue to anticipate the adoption of the following final rules throughout the remainder of 2011:
- Exchange listing standards regarding compensation committee independence and factors affecting compensation adviser independence
- Disclosure regarding compensation consultant conflicts of interest
- Disclosure related to “conflict minerals”
- Disclosure of mine safety information
- Enhanced disclosure by resource extraction issuers
What Should You Do Now?
Companies should continue to monitor the rulemaking process but should not expect the pace to pick up anytime soon. Although the executive compensation rules outlined above have been delayed, some of the provisions may be effective for proxies filed after January. You may recall that the final say-on-pay rules were adopted in late January 2011, and we may be in for a repeat of similar last-minute developments this upcoming proxy season.
Additional Articles from the Fall 2011 Public Company Forum:
A Proxy Advisor’s Negative Recommendation on Say-on-Pay: How Much Should You Care?
Director Diversity = Dollars
Is it Bigger than a Breadbox? Navigating Materiality
What’s Market? Are Press Releases Passé?