II 

111TH CONGRESS 

1ST SESSION S. 1074 

To provide shareholders with enhanced authority over the nomination, 

election, and compensation of public company executives. 

IN THE SENATE OF THE UNITED STATES 

MAY 19, 2009 

Mr. SCHUMER (for himself and Ms. CANTWELL) introduced the following bill; 

which was read twice and referred to the Committee on Banking, Housing, and Urban Affairs 

A BILL 

To provide shareholders with enhanced authority over the 

nomination, election, and compensation of public company executives. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Shareholder Bill of 

5 Rights Act of 2009’’. 

6 SEC. 2. FINDINGS. 

7 Congress finds that— 

8 (1) among the central causes of the financial 

9 and economic crises that the United States faces 


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1 today has been a widespread failure of corporate 

2 governance; 

3 (2) within too many of the Nation’s most im4 portant businesses and financial institutions, both 

5 executive management and boards of directors have 

6 failed in their most basic duties, including to enact 

7 compensation policies that are linked to the long8 term profitability of their institutions, to appro9 priately analyze and oversee enterprise risk, and 

10 most importantly, to prioritize the long-term health 

11 of their firms and their shareholders; 

12 (3) such failure has led to the loss of trillions 

13 of dollars in shareholder value, losses that have been 

14 borne by millions of Americans who are shareholders 

15 through their pension plans, 401(k) plans, and di16 rect investments; 

17 (4) a key contributing factor to such failure was 

18 the lack of accountability of boards to their ultimate 

19 owners, the shareholders; 

20 (5) policies that serve to limit the ability of 

21 shareholders to nominate and elect board members 

22 have served to minimize the accountability of boards 

23 and management to shareholders; 

24 (6) it has always been the intent of Congress 

25 that the Securities and Exchange Commission 


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1 should have full authority to determine the use of 

2 the issuer proxy with regards to the nomination and 

3 election of directors by shareholders; and 

4 (7) providing a greater voice to shareholders 

5 while not impinging on management prerogatives is 

6 in the best interests of shareholders, public corpora7 tions, and the economy as a whole. 

8 SEC. 3. SHAREHOLDER VOTE ON EXECUTIVE COMPENSA9 TION DISCLOSURES. 

10 (a) AMENDMENT.—The Securities Exchange Act of 

11 1934 (15 U.S.C. 78a et seq.) is amended by inserting after 

12 section 14 the following new section: 

13 ‘‘SEC. 14A. ANNUAL SHAREHOLDER APPROVAL OF EXECU14 TIVE COMPENSATION. 

15 ‘‘(a) SEPARATE RESOLUTION REQUIRED.—Any 

16 proxy or consent or authorization for an annual or other 

17 meeting for which the proxy solicitation rules of the Com18 mission require compensation disclosure of the share19 holders occurring after the end of the 1-year period begin20 ning on the date of enactment of this subsection, shall in21 clude a separate resolution subject to shareholder vote to 

22 approve the compensation of executives as disclosed pursu23 ant to the compensation disclosure rules of the Commis24 sion (which disclosure shall include the compensation disVerDate Nov 24 2008 05:30 May 22, 2009 Jkt 079200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S1074.IS S1074

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1 cussion and analysis, the compensation tables, and any re2 lated material). 

3 ‘‘(b) RULE OF CONSTRUCTION.—The shareholder 

4 vote referred to in subsection (a) shall not be binding on 

5 the board of directors and shall not be construed— 

6 ‘‘(1) as overruling a decision by such board; 

7 ‘‘(2) to create or imply any change to the cur8 rent fiduciary duties of such board; 

9 ‘‘(3) to create or imply any additional fiduciary 

10 duty by such board; or 

11 ‘‘(4) to restrict or limit the ability of share12 holders to make proposals for inclusion in such 

13 proxy materials related to executive compensation. 

14 ‘‘(c) SHAREHOLDER APPROVAL OF GOLDEN PARA15 CHUTE COMPENSATION.— 

16 ‘‘(1) DISCLOSURE.—In any proxy solicitation 

17 material for an annual or other meeting of the 

18 shareholders occurring after the end of the 1-year 

19 period beginning on the date of enactment of this 

20 subsection, that concerns an acquisition, merger, 

21 consolidation, or proposed sale or other disposition 

22 of substantially all of the assets of an issuer, the 

23 person making such solicitation shall disclose in the 

24 proxy solicitation material, in a clear and simple 

25 form in accordance with regulations of the CommisVerDate Nov 24 2008 05:30 May 22, 2009 Jkt 079200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S1074.IS S1074

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1 sion, any agreements or understandings that such 

2 person has with any principal executive officers of 

3 such issuer (or of the acquiring issuer, if such issuer 

4 is not the acquiring issuer) concerning any type of 

5 compensation (whether present, deferred, or contin6 gent) that are based on or are otherwise related to 

7 the acquisition, merger, consolidation, sale, or other 

8 disposition, and that have not been subject to a 

9 shareholder vote under subsection (a). 

10 ‘‘(2) SHAREHOLDER APPROVAL.— 

11 ‘‘(A) IN GENERAL.—The proxy solicitation 

12 material containing the disclosure required by 

13 paragraph (1) shall require a separate share14 holder vote to approve such agreements or un15 derstandings. 

16 ‘‘(B) RULE OF CONSTRUCTION.—A vote by 

17 the shareholders referred to in subparagraph 

18 (A) shall not be binding on the board of direc19 tors and shall not be construed— 

20 ‘‘(i) as overruling a decision by such 

21 board; 

22 ‘‘(ii) to create or imply any change to 

23 the current fiduciary duties of such board; 

24 ‘‘(iii) to create or imply any additional 

25 fiduciary duty by such board; or 


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1 ‘‘(iv) to restrict or limit the ability of 

2 shareholders to make proposals for inclu3 sion in such proxy materials related to ex4 ecutive compensation.’’. 

5 (b) DEADLINE FOR RULEMAKING.—Not later than 1 

6 year after the date of the enactment of this Act, the Secu7 rities and Exchange Commission (in this Act referred to 

8 as the ‘‘Commission’’) shall issue final rules to carry out 

9 section 14A of the Securities Exchange Act of 1934, as 

10 added by this section. 

11 SEC. 4. SHAREHOLDER INPUT IN BOARD ELECTIONS. 

12 Section 14A of the Securities Exchange Act of 1934, 

13 as added by this Act, is amended by adding at the end 

14 the following: 

15 ‘‘(d) CONFIRMATION OF COMMISSION AUTHORITY ON

16 SHAREHOLDER ACCESS TO PROXIES FOR BOARD NOMI17 NATIONS.— 

18 ‘‘(1) COMMISSION RULES.—The Commission 

19 shall establish rules relating to the use by share20 holders of proxy solicitation materials supplied by 

21 the issuer for the purpose of nominating individuals 

22 to membership on the board of directors of an 

23 issuer. 

24 ‘‘(2) SHAREHOLDER REQUIREMENTS.—The 

25 rules of the Commission under this paragraph relatVerDate Nov 24 2008 05:30 May 22, 2009 Jkt 079200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S1074.IS S1074

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1 ing to the use by shareholders of proxy solicitation 

2 materials supplied by the issuer for the purpose of 

3 nominating individuals to membership on the board 

4 of directors of an issuer may not provide for such 

5 use, unless the shareholder, or a group of share6 holders acting by agreement, has beneficially owned, 

7 directly or indirectly, an aggregate of not less than 

8 one percent of the voting securities of the issuer for 

9 at least the 2-year period preceding the date of the 

10 next scheduled annual meeting of the issuer.’’. 

11 SEC. 5. CORPORATE GOVERNANCE STANDARDS. 

12 Section 14A of the Securities Exchange Act of 1934, 

13 as added by this Act, is amended by adding at the end 

14 the following: 

15 ‘‘(e) CORPORATE GOVERNANCE STANDARDS.— 

16 ‘‘(1) LISTING STANDARDS.— 

17 ‘‘(A) IN GENERAL.—Not later than 1 year 

18 after the date of enactment of this subsection, 

19 the Commission shall, by rule, direct the na20 tional securities exchanges and national securi21 ties associations to prohibit the listing of any 

22 security of an issuer that is not in compliance 

23 with any of the requirements of paragraphs (2) 

24 through (5), notwithstanding any other provi25 sion of law. 


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1 ‘‘(B) OPPORTUNITY TO COMPLY AND

2 CURE.—The rules under this paragraph shall 

3 provide for appropriate procedures for an issuer 

4 to have an opportunity to come into compliance 

5 with the requirements of this subsection and to 

6 cure any defects that would be the basis for a 

7 prohibition under subparagraph (A), before the 

8 imposition of such prohibition. 

9 ‘‘(C) AUTHORITY TO EXEMPT.—The Com10 mission may, by rule or order, exempt certain 

11 issuers from any or all of the requirements of 

12 this subsection and the rules issued under this 

13 subsection, based on the size of the issuer, mar14 ket capitalization, public float, number of share15 holders of record, or other criteria, as the Com16 mission deems necessary or appropriate. 

17 ‘‘(2) DIRECTOR INDEPENDENCE.—Each issuer 

18 shall provide in governing documents or in a public 

19 statement of corporate policy that, consistent with 

20 the status of the issuer as a company having a class 

21 of equity securities that are registered under sub22 section (b) or (g) of section 12, the chairperson of 

23 the board of directors of the issuer— 

24 ‘‘(A) shall be independent, as determined 

25 in accordance with the rules of the exchange on 


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1 which the securities of such issuer are listed, 

2 and otherwise by rule of the Commission; and 

3 ‘‘(B) shall not have previously served as an 

4 executive officer of the issuer. 

5 ‘‘(3) ANNUAL ELECTIONS REQUIRED.—Each 

6 issuer shall provide in its governing documents that 

7 each member of the board of directors of the issuer 

8 shall be subject to annual election by the share9 holders. Nothing in this subsection may be construed 

10 to establish a maximum period of service, or other11 wise limit the terms of service, on the board of direc12 tors of an issuer. 

13 ‘‘(4) COMMISSION RULES ON ELECTIONS.—In 

14 board elections— 

15 ‘‘(A) directors in uncontested elections 

16 shall be elected by a majority of votes cast as 

17 to each nominee; 

18 ‘‘(B) if such election is contested, where 

19 the number of nominees exceeds the number of 

20 directors to be elected, directors shall be elected 

21 by the vote of a plurality of the shares rep22 resented at an any meeting and entitled to vote; 

23 and 


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1 ‘‘(C) if a member of the board of directors 

2 of an issuer is not elected to a new term in an 

3 uncontested election— 

4 ‘‘(i) such director shall tender his or 

5 her resignation to the board of directors; 

6 and 

7 ‘‘(ii) the board of directors shall— 

8 ‘‘(I) accept such resignation; 

9 ‘‘(II) determine a date on which 

10 such resignation will take effect, with11 in a reasonable period of time, as es12 tablished by the Commission; and 

13 ‘‘(III) make that date public 

14 within a reasonable period of time. 

15 ‘‘(5) RISK COMMITTEE.— 

16 ‘‘(A) IN GENERAL.—Each issuer shall, 1 

17 year after the date of issuance of final rules 

18 under subparagraph (B), establish a risk com19 mittee, comprised entirely of independent direc20 tors, which shall be responsible for the estab21 lishment and evaluation of the risk management 

22 practices of the issuer. 

23 ‘‘(B) COMMISSION RULEMAKING.—The 

24 Commission shall issue final rules regarding the 

25 establishment of risk committees under this 


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1 paragraph, not later than 1 year after the date 

2 of enactment of this subsection.’’. 

Æ 


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