Vedder Thinking | News Stewart Reifler Discusses Impact of Dodd-Frank Financial Reform on Compensation Committees
Stewart Reifler recently spoke at several conferences regarding changes to executive compensation that will be required by financial reform. This new legislation, known as the Dodd-Frank Act, became law on July 21, when it was signed by President Obama. Dodd-Frank codified what will soon become executive compensation “best practices” for all public company compensation committees. In addition, the new law will indirectly impact both private-company and non-profit corporate governance, similar to what occurred after the enactment of the Sarbanes-Oxley Act in 2002.
Reifler spoke at the Practising Law Institute’s “Compensation Committee in the Spotlight” conference held in New York City on June 29. He was joined via telephone by Thomas J. Kim, Chief Counsel at the Division of Corporation Finance of the Securities and Exchange Commission. Prior to that, he spoke at the Equilar 2010 Executive Compensation Summit held in Washington, DC on June 15th, and at an executive compensation conference sponsored by J.P. Morgan held at the Cherokee Club in Atlanta, Georgia on May 13th.
Dodd-Frank requires independence of the members of the compensation committees of publicly traded companies. In addition, it requires independence of those consultants and lawyers who advise public company compensation committees.
“What the Sarbanes-Oxley Act did to public company audit committees in 2002,” said Reifler, “the Dodd-Frank Act will do to public company compensation committees in 2010.” The new law also requires public companies to have their shareholders vote on executive compensation at least once every three years. “This is a game-changer,” said Reifler, “since now every company will have a periodic vote on a company’s executive compensation program. Before, only a few public companies were targeted by shareholders for such a vote, or were required to do so only because they took government funds under the TARP program. Now, every shareholder of every public company (with certain exceptions) will get a chance to have his or her “say on pay.”
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