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Governance, Risk Management, and Compliance: It Can't Happen to Us—Avoiding Corporate Disaster While Driving Success by Richard M. Steinberg

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Dodd-Frank's Proxy Access

Adding to those achievements, a number of items on shareholders' wish lists came to fruition with the coming of Dodd-Frank, including say-on-pay; broker no-vote; independence standards for compensation committees and for engaging compensation consultants; mandates for new disclosures on the relationship between executive compensation and company performance, on the ratio of compensation paid to the CEO and median pay for all other employees, and on hedging of company equity securities; and clawback provisions that go beyond those in Sarbanes-Oxley, among other rules.

Managements and boards will be challenged in dealing with these requirements in a number of areas, such as deciding what constitutes “independence” and “company performance,” and which costs should be included in median pay for “all other employees.” Regulations will be forthcoming, but the extent of their specificity is to be determined.

But, as noted in Chapter 10, the biggest prize inside Dodd-Frank, straight from the top of shareholder wish lists, is none other than shareholder access to the proxy statement. For some time before Dodd-Frank, the SEC considered giving shareholders proxy access. Certainly the actions (or lack thereof) of boards during the financial system near meltdown, combined with long-simmering displeasure with directors on their handling of CEO compensation, were influential in prompting the initiative. And soon after the SEC gained clear authority, it acted.

The SEC ...

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