Developments in Securities Regulation, Corporate Governance, Capital Markets, M&A and Other Topics of Interest. MORE

[Note this post was updated on September 30, 2012 to note pending rule proposals by the NYSE and Nasdaq regarding the independence of compensation committees and other matters.]

At this time, there are relatively few new items that need to be considered for the upcoming proxy and 10-K season.  Perhaps the biggest change is smaller reporting companies will have to hold say-on-pay and frequency of say-on-pay votes.  However, far ranging changes related to the conflict minerals rules and disclosures for resource extraction issuers will begin to take substantial time and attention.

Item Status
Proxy Statements  
1.  Compensation Consultant Conflicts of Interest: New S-K Item 407(e)(3)(iv) provides that if any compensation consultant has played a role in determining or recommending the amount or form of executive and director compensation, and the consultant’s work has raised any conflict of interest, then disclosure of the nature of the conflict and how the conflict is being addressed is required.  This rule is effective for any proxy or information statement for an annual meeting of shareholders at which directors will be elected occurring after January 1, 2013.  Effective
2.  Say-on-pay exemption for smaller reporting companies:  Companies that qualified as “smaller reporting companies” as of January 21, 2011, including newly public companies that qualify as smaller reporting companies after January 21, 2011, are subject to the say-on-pay rules as of the first annual or other meeting of shareholders at which directors will be elected and for which the rules of the SEC require executive compensation disclosure pursuant to Item 402 of Regulation S-K occurring on or after January 21, 2013 Effective
3.  Say-on-pay advisory vote: Whether other issuers are required to include a say-on-pay advisory vote depends on what frequency the Board adopted in prior years after considering the shareholder advisory vote on frequency.  If a say-on-pay vote is included: Effective
  • Rule 14a-21(a):  Resolution for an advisory vote on compensation of named executive officers as disclosed pursuant to Item 402 of Regulation S-K
  • Item 24 of Schedule 14A:  Required disclosure that advisory votes under 14A-21 are included pursuant to Section 14A of the Exchange Act and the general effect of each such vote. 




4.  Other say-on-pay disclosures where a prior vote was held: Effective
  • S-K Item 402(b)(1)(vii):  Disclose in the CD&A the extent to which previous shareholder say-on-pay votes has been considered.
  • Item 24 of Schedule 14A:  Disclose current frequency of shareholder advisory votes on executive compensation and when the next shareholder advisory vote will occur.


5.  Say-on-pay frequency vote Effective
  • Rule 14a-21(b):  A frequency vote must be held every six calendar years.  For most issuers the next frequency vote will be for the 2017 proxy season.
  • Rule 14a-21(b): Resolution on advisory vote as to whether say-on-pay vote shall be held every one, two or three years.


  • Rule 14a-4(b)(3):  Form of proxy—must offer choice between 1, 2 or 3 years or abstain.


Form 10-K  
1.  Mine Safety Disclosure  
  • Part I of Form 10-K:  If applicable, issuers must note that they have mine safety violations or other regulatory matters to report in accordance with Section 1503(a) of the Dodd-Frank Act, and the required information must be included in an exhibit to the filing.
2. Iran Threat Reduction and Syria Human Rights Act of 2012  
  • Certain disclosures must be made and other actions must be taken if certain sanctions against Iran are not complied with.
3.  XBRL:  Detailed footnote tagging will be required. Effective
Form SD  
1.   Conflict Minerals:  Final rules require certain companies to disclose their use of conflict minerals if those minerals are “necessary to the functionality or production of a product” manufactured by those companies.  See our three step analysis here, here and here.  Issuers must comply with the final rule for the calendar year beginning January 1, 2013 with the first reports due May 31, 2014. Effective
2.  Resource Extraction Issuers: Final rules require resource extraction issuers to include in an annual report information relating to any payment made by the issuer, a subsidiary of the issuer, or an entity under the control of the issuer, to a foreign government or the Federal Government for the purpose of the commercial development of oil, natural gas, or minerals.  A resource extraction issuer must comply with the new rules for fiscal years ending after September 30, 2013. For the first report filed for fiscal years ending after September 30, 2013, a resource extraction issuer may provide a partial year report if the issuer’s fiscal year began before September 30, 2013. For any fiscal year beginning on or after September 30, 2013, a resource extraction issuer will be required to file a report disclosing payments for the full fiscal year. Effective
Awaiting Further Action  
1.   Compensation committees, consultants and advisers  (Section 952 of the Dodd-Frank Act)

  • Independent compensation committee
  • Authority of committee to retain consultants and advisers
  • Compensation consultants conflict of interest


Final rules have been published by the SEC which require in certain circumstances further action by the exchanges; the NYSE and Nasdaq have both proposed implementing rule changes; effective disclosures under S-K Item 407(e)(3)(iv) discussed above.
2.   Pay for performance disclosures (Section 953 of the Dodd-Frank Act)

  • Demonstrate relationship between compensation actually paid and the financial performance of the issuer
No proposed rules have been published.  The SEC no longer publishes a proposed rulemaking time frame.
3.   Pay disparity ratio (Section 953 of the Dodd-Frank Act)

  • Annual compensation of CEO
  • Median total compensation of all employees other than the CEO
  • Ratio of median total compensation to CEO compensation
No proposed rules have been published.  The SEC no longer publishes a proposed rulemaking time frame.
4.   Clawback requirements  (Section 954 of the Dodd-Frank Act)

  • Disclosure of policy on incentive-based compensation based on financial information
  • Clawback in the event of an accounting restatement
No proposed rules have been published.  The SEC no longer publishes a proposed rulemaking time frame.
5.   Disclosure of hedging policy (Section 955 of the Dodd-Frank Act)

  • Disclose whether directors or employees are permitted to hedge company securities
No proposed rules have been published. The SEC no longer publishes a proposed rulemaking time frame.

Check frequently for updates on the Dodd-Frank Act and other important securities law matters.