SEC Adopts Say-on-Pay Rules

January 25, 2011 ( – The U.S. Securities and Exchange Commission has approved shareholder say-on-pay rules as required by the Dodd-Frank financial reform bill.

Reuters reports that under the new rules, shareholders of publicly-listed companies will get to weigh in on executive compensation through advisory votes. The say-on-pay vote is non-binding, but Reuters noted that companies generally want to avoid the embarrassment of a “no” vote.  

Shareholders would also get to vote on certain so-called “golden parachute” pay packages in connection with a merger or acquisition, and companies would be required to make additional disclosures about such compensation arrangements.  

The rule was approved by a 3-2 vote. According to Reuters, Republican commissioners dissented on the rule in part because it only gives a temporary exemption to small public companies. The rule “should have afforded smaller companies an outright exemption,” said Republican Commissioner Troy Paredes.