66590 Federal Register / Vol. 75, No. 208 / Thursday, October 28, 2010 / Proposed Rules 

1 17 CFR 240.14a–4. 

2 17 CFR 240.14a–6. 

3 17 CFR 240.14a–8. 

4 17 CFR 240.14a–101. 

5 17 CFR 240.14c–101. 

6 15 U.S.C. 78a et seq. 

7 17 CFR 229.402. 

8 17 CFR 229.10 et seq. 

9 17 CFR 229.1011. 

10 17 CFR 229.1000 et seq. 

11 17 CFR 240.13e–100. 

12 17 CFR 240.14d–101. 

13 17 CFR 249.310. 

14 17 CFR 249.308a. 15Public Law 111–203 (July 21, 2010). 

SECURITIES AND EXCHANGE 

COMMISSION 

17 CFR Parts 229, 240, and 249 

[Release Nos. 33–9153; 34–63124; File No. 

S7–31–10] 

RIN 3235–AK68 

Shareholder Approval of Executive 

Compensation and Golden Parachute 

Compensation 

AGENCY: Securities and Exchange 

Commission. 

ACTION: Proposed rule. 

SUMMARY: We are proposing 

amendments to our rules to implement 

the provisions of the Dodd-Frank Wall 

Street Reform and Consumer Protection 

Act relating to shareholder approval of 

executive compensation and ‘‘golden 

parachute’’ compensation arrangements. 

Section 951 of the Dodd-Frank Act 

amends the Securities Exchange Act of 

1934 by adding Section 14A, which 

requires companies to conduct a 

separate shareholder advisory vote to 

approve the compensation of 

executives, as disclosed pursuant to 

Item 402 of Regulation S–K or any 

successor to Item 402. Section 14A also 

requires companies to conduct a 

separate shareholder advisory vote to 

determine how often an issuer will 

conduct a shareholder advisory vote on 

executive compensation. In addition, 

Section 14A requires companies 

soliciting votes to approve merger or 

acquisition transactions to provide 

disclosure of certain ‘‘golden parachute’’ 

compensation arrangements and, in 

certain circumstances, to conduct a 

separate shareholder advisory vote to 

approve the golden parachute 

compensation arrangements. 

DATES: Comments should be received on 

or before November 18, 2010. 

ADDRESSES: Comments may be 

submitted by any of the following 

methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/ 

rules/proposed.shtml); 

• Send an e-mail to rulecomments@sec.gov. Please include File 

Number S7–31–10 on the subject line; 

or 

• Use the Federal Rulemaking Portal 

(http://www.regulations.gov). Follow the 

instructions for submitting comments. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number S7–31–10. This file number 

should be included on the subject line 

if e-mail is used. To help us process and 

review your comments more efficiently, 

please use only one method. The 

Commission will post all comments on 

the Commission’s Internet Web site 

(http://www.sec.gov/rules/ 

proposed.shtml). Comments are also 

available for Web site viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street, NE., 

Washington, DC 20549, on official 

business days between the hours of 10 

a.m. and 3 p.m. All comments received 

will be posted without change; we do 

not edit personal identifying 

information from submissions. You 

should submit only information that 

you wish to make available publicly. 

FOR FURTHER INFORMATION CONTACT: 

Scott Hodgdon, Attorney-Adviser, at 

(202) 551–3430, Anne Krauskopf, Senior 

Special Counsel, at (202) 551–3500, or 

Perry Hindin, Special Counsel, at (202) 

551–3440, Division of Corporation 

Finance, U.S. Securities and Exchange 

Commission, 100 F Street, NE., 

Washington, DC 20549–3628. 

SUPPLEMENTARY INFORMATION: We are 

proposing new Rule 14a–21 and 

amendments to Rules 14a–4,1 14a–6,2

14a–8 3 and a new Item 24 and 

amendments to Item 5 to Schedule 

14A 4 and amendments to Item 3 to 

Schedule 14C 5 under the Securities 

Exchange Act of 1934 (‘‘Exchange Act’’).6

We are also proposing amendments to 

Item 402 7 of Regulation S–K,8 Item 

1011 9 of Regulation M–A,10 Item 15 of 

Schedule 13E–3,11 Item 8 of Schedule 

14D–9,12 Item 9B in Part II of Form 10– 

K,13 and Item 5(c) in Part II of Form 10– 

Q.14

Table of Contents 

I. Background and Summary 

II. Discussion of the Proposed Amendments 

A. Shareholder Approval of Executive 

Compensation 

1. Proposed Rule 14a–21(a) 

2. Proposed Item 24 to Schedule 14A 

3. Proposed Amendments to Item 402(b) of 

Regulation S–K 

B. Shareholder Approval of the Frequency 

of Shareholder Votes on Executive 

Compensation 

1. Proposed Rule 14a–21(b) 

2. Proposed Item 24 of Schedule 14A 

3. Proposed Amendment to Rule 14a–4 

4. Proposed Amendment to Rule 14a–8 

5. Proposed Amendments to Form 10–K 

and Form 10–Q 

6. Effect of Shareholder Vote 

C. Issues Relating to Both Shareholder 

Votes Required by Section 14A(a) 

1. Proposed Amendments to Rule 14a–6 

2. Broker Discretionary Voting 

3. Relationship to Shareholder Votes on 

Executive Compensation for TARP 

Companies 

D. Disclosure of Golden Parachute 

Arrangements and Shareholder Approval 

of Golden Parachute Arrangements 

1. General 

2. Proposed Item 402(t) of Regulation S–K 

3. Amendments to Schedule 14A, Schedule 

14C, Schedule 14D–9, Schedule 13E–3, 

and Item 1011 of Regulation M–A 

4. Proposed Rule 14a–21(c) 

E. Treatment of Smaller Companies 

F. Transition Matters 

G. General Request for Comment 

III. Paperwork Reduction Act 

A. Background 

B. Burden and Cost Estimates Related to 

the Proposed Amendments 

C. Request for Comment 

IV. Cost-Benefit Analysis 

A. Introduction 

B. Benefits 

C. Costs 

D. Request for Comment 

V. Small Business Regulatory Enforcement 

Fairness Act 

VI. Consideration of Impact on the Economy, 

Burden on Competition, and Promotion 

of Efficiency, Competition, and Capital 

Formation 

VII. Initial Regulatory Flexibility Act 

Analysis 

A. Reasons for, and Objectives of, the 

Proposed Action 

B. Legal Basis 

C. Small Entities Subject to the Proposed 

Action 

D. Reporting, Recordkeeping, and Other 

Compliance Requirements 

E. Duplicative, Overlapping, or Conflicting 

Federal Rules 

F. Significant Alternatives 

G. Solicitation of Comments 

VIII. Statutory Authority and Text of the 

Proposed Amendments 

I. Background and Summary 

Section 951 of the Dodd-Frank Wall 

Street Reform and Consumer Protection 

Act (the ‘‘Act’’) 15 amends the Exchange 

Act by adding new Section 14A. New 

Section 14A(a)(1) requires that ‘‘[n]ot 

less frequently than once every 3 years, 

a proxy or consent or authorization for 

an annual or other meeting of the 

shareholders for which the proxy 


jlentini on DSKJ8SOYB1PROD with PROPOSALS3
Federal Register / Vol. 75, No. 208 / Thursday, October 28, 2010 / Proposed Rules 66591 

16Exchange Act Section 14A(a)(1). Section 951 of 

the Act includes the language ‘‘or other meeting of 

the shareholders,’’ which is similar to 

corresponding language in Section 111(e)(1) of the 

Emergency Economic Stabilization Act of 2008, or 

EESA, 12 U.S.C. 5221. We have previously 

considered this language in connection with 

companies required to provide a separate 

shareholder vote on executive compensation so 

long as the company has outstanding obligations 

under the Troubled Asset Relief Program, or TARP. 

See Shareholder Approval of Executive 

Compensation of TARP Recipients, Release No. 34– 

61335 (Jan. 12, 2010) [75 FR 2789] (hereinafter, the 

‘‘TARP Adopting Release’’). We continue to view 

this provision to require a separate shareholder vote 

on executive compensation only with respect to an 

annual meeting of shareholders for which proxies 

will be solicited for the election of directors, or a 

special meeting in lieu of such annual meeting. 

Similarly, proposed Rules 14a–21(a) and (b) are 

intended to result in issuers conducting the 

required advisory votes in connection with the 

election of directors, the proxy materials for which 

are required to include disclosure of executive 

compensation. 

17Exchange Act Section 14A(a)(1). 

18Exchange Act Section 14A(c). 

19Exchange Act Section 14A(a)(2). 

20Exchange Act Section 14A(a)(2). 

21Exchange Act Section 14A(c). 

22Exchange Act Section 14A(b)(1). 

23Exchange Act Section 14A(b)(1). 

24Exchange Act Section 14A(b)(2). 

25Exchange Act Section 14A(b)(2). 

26Exchange Act Section 14A(c). For a more 

detailed discussion of the advisory nature of the 

shareholder votes required by Section 951 of the 

Act, see Section II.B.6 below. 

27Exchange Act Section 14A(c)(1). 

28Exchange Act Section 14A(c)(2). 

29Exchange Act Section 14A(c)(3). 

30Exchange Act Section 14A(c)(4). In addition, 

Exchange Act Section 14A(d) provides that every 

institutional manager subject to Exchange Act 

Section 13(f) [15 U.S.C. 78m(f)] shall report at least 

annually how it voted on any shareholder vote 

required by Section 951 of the Act, including the 

shareholder vote on executive compensation, the 

shareholder vote on the frequency of shareholder 

votes on executive compensation, and the golden 

parachute compensation vote, unless such vote is 

otherwise required to be reported publicly by rule 

or regulation of the Commission. Amendments to 

our rules to implement this requirement will be 

proposed in a separate rulemaking. 

31Exchange Act Section 14A(a)(3). 

32For a discussion of the relationship between 

Section 14A and the required shareholder votes on 

executive compensation for companies subject to 

EESA with outstanding obligations under TARP, 

see Section II.C.3 below. 

33Exchange Act Section 14A(b)(1). 

solicitation rules of the Commission 

require compensation disclosure’’ 16

must also ‘‘include a separate resolution 

subject to shareholder vote to approve 

the compensation of executives,’’ 17 as 

disclosed pursuant to Item 402 of 

Regulation S–K, or any successor to 

Item 402 (a ‘‘say-on-pay’’ vote). The 

shareholder vote to approve executive 

compensation required by Section 

14A(a)(1) ‘‘shall not be binding on the 

issuer or the board of directors of an 

issuer.’’ 18

Section 951 of the Act also adds new 

Section 14A(a)(2) to the Exchange Act, 

requiring that, ‘‘[n]ot less frequently 

than once every 6 years, a proxy or 

consent or authorization for an annual 

or other meeting of the shareholders for 

which the proxy solicitation rules of the 

Commission require compensation 

disclosure shall include a separate 

resolution subject to shareholder vote to 

determine’’ 19 whether the shareholder 

vote to approve the compensation of 

executives ‘‘will occur every 1, 2, or 3 

years.’’ 20 As discussed below, this 

shareholder vote ‘‘shall not be binding 

on the issuer or the board of directors 

of an issuer.’’ 21

In addition, Section 951 of the Act 

amends the Exchange Act by adding 

new Section 14A(b)(1), which requires 

that, in any proxy or consent solicitation 

material for a meeting of shareholders 

‘‘at which shareholders are asked to 

approve an acquisition, merger, 

consolidation, or proposed sale or other 

disposition of all or substantially all the 

assets of an issuer, the person making 

such solicitation shall disclose in the 

proxy or consent solicitation material, 

in a clear and simple form in 

accordance with regulations to be 

promulgated by the Commission, any 

agreements or understandings that such 

person has with any named executive 

officers of such issuer (or of the 

acquiring issuer, if such issuer is not the 

acquiring issuer) concerning any type of 

compensation (whether present, 

deferred, or contingent) that is based on 

or otherwise relates to the acquisition, 

merger, consolidation, sale or other 

disposition of all or substantially all of 

the assets of the issuer.’’ 22 These 

compensation arrangements are often 

referred to as ‘‘golden parachute’’ 

compensation. Such disclosure must 

include the aggregate total of all such 

compensation that may be paid or 

become payable to or on behalf of such 

named executive officer, and the 

conditions upon which it may be paid 

or become payable.23 Under Section 

14A(b)(2), ‘‘unless such agreements or 

understandings have been subject to 

[the periodic vote described in Section 

14A(a)(1)],’’ 24 a separate shareholder 

vote to approve such agreements or 

understandings and compensation as 

disclosed is also required.25 As with the 

annual shareholder vote to approve the 

compensation of executives and the 

shareholder vote on the frequency of 

such votes, this shareholder vote ‘‘shall 

not be binding on the issuer or the board 

of directors of an issuer.’’ 26

None of the shareholder votes 

required pursuant to Section 14A 

(including the shareholder vote to 

approve executive compensation, the 

shareholder vote on the frequency of 

such votes, and the shareholder vote to 

approve golden parachute 

compensation) is binding on an issuer 

or its board of directors or is to be 

construed ‘‘as overruling a decision by 

such issuer or board of directors.’’ 27

These shareholder votes also do not 

‘‘create or imply any change to the 

fiduciary duties of such issuer or board 

of directors’’ 28 nor do they ‘‘create or 

imply any additional fiduciary duties 

for such issuer or board of directors.’’ 29

In addition, these votes will not be 

construed ‘‘to restrict or limit the ability 

of shareholders to make proposals for 

inclusion in proxy materials related to 

executive compensation.’’ 30

Section 14A(a)(3) requires that both 

the initial shareholder vote on executive 

compensation and the initial vote on the 

frequency of votes on executive 

compensation be included in proxy 

statements ‘‘for the first annual or other 

meeting of the shareholders occurring 

after the end of the 6-month period 

beginning on the date of enactment’’ of 

the Act.31 Thus, the statute requires 

separate resolutions subject to 

shareholder vote to approve executive 

compensation and to approve the 

frequency of say-on-pay votes for proxy 

statements relating to an issuer’s first 

annual or other meeting of the 

shareholders occurring on or after 

January 21, 2011, whether or not the 

Commission has adopted rules to 

implement Section 14A(a). Because 

Section 14A(a) applies to shareholder 

meetings taking place on or after 

January 21, 2011, any proxy statements, 

whether in preliminary or definitive 

form, even if filed prior to this date, for 

meetings taking place on or after 

January 21, 2011, must include the 

separate resolutions for shareholders to 

approve executive compensation and 

the frequency of say-on-pay votes 

required by Section 14A(a) without 

regard to whether the amendments 

proposed in this release have been 

adopted by that time.32

With respect to the disclosure of 

golden parachute arrangements in 

accordance with Commission 

regulations in merger proxy statements 

required by Section 14A(b)(1), we note 

that the statute similarly references a 6- 

month period beginning on the date of 

enactment of the Act. However, because 

the statute requires such disclosure ‘‘in 

accordance with regulations to be 

promulgated by the Commission,’’ 33 the 

golden parachute compensation 

arrangements disclosure under 

proposed new Item 402(t) and a separate 


jlentini on DSKJ8SOYB1PROD with PROPOSALS3
66592 Federal Register / Vol. 75, No. 208 / Thursday, October 28, 2010 / Proposed Rules 

34 17 CFR 240.13e–3. 

35Our proposed rules would apply to issuers who 

have a class of equity securities registered under 

Section 12 [15 U.S.C. 78l] of the Exchange Act and 

are subject to our proxy rules. The application of 

this provision to companies subject to EESA with 

outstanding obligations under TARP is discussed in 

Section II.C.3 below. 

36Section 14A(a)(3) requires the shareholder 

advisory votes beginning with ‘‘the first annual or 

other meeting of the shareholders occurring after 

the end of the 6-month period beginning on the date 

of enactment’’ of Section 951 of the Act. The Act 

was enacted on July 21, 2010. 

37 17 CFR 229.402(a)(3). 

38 If disclosure of golden parachute compensation 

arrangements pursuant to proposed Item 402(t) is 

included in an annual meeting proxy statement, 

such disclosure would be included in the 

disclosure subject to the shareholder advisory vote 

under Rule 14a–21(a). We are not proposing, 

however, to require that such disclosure under Item 

402(t) be included in all annual meeting proxy 

statements. 

39While not required, our rules ‘‘would not 

preclude an issuer from seeking more specific 

shareholder opinion through separate votes on cash 

compensation, golden parachute policy, severance 

or other aspects of compensation.’’ See Report of the 

Senate Committee on Banking, Housing, and Urban 

Affairs regarding The Restoring American Financial 

Stability Act of 2010, S. Rep. No. 111–176 at 133 

(2010). 

40As defined in Rule 12b–2 [17 CFR 240.12b–2], 

these generally are companies with a public float 

of less than $75 million as of the last day of their 

most recently completed second fiscal quarter. 

41 17 CFR 229.402(m). 

42 17 CFR 229.402(q). 

43 In connection with the shareholder vote on 

executive compensation for companies subject to 

EESA with outstanding obligations under TARP, we 

adopted a similar instruction to Rule 14a–20. See 

TARP Adopting Release, supra note 16, at 75 FR 

2795. 

44 17 CFR 229.402(k). 

45 17 CFR 229.402(r). 

46 17 CFR 229.402(s). 

47See Proxy Disclosure Enhancements, Release 

No. 33–9089 (Dec. 16, 2009) [74 FR 68334] at note 

38. 

48Exchange Act Section 14A(a)(1). 

49See the corresponding discussion in the TARP 

Adopting Release, supra note 16, at 75 FR 2791, 

note 14. 

resolution to approve golden parachute 

compensation arrangements pursuant to 

Rule 14a–21(c) would not be required 

for merger proxy statements relating to 

a meeting of shareholders until the 

effective date of our rules implementing 

Section 14A(b)(1). 

We are proposing Rule 14a–21 to 

provide a separate shareholder vote to 

approve executive compensation, to 

approve the frequency of such votes on 

executive compensation and to approve 

golden parachute compensation 

arrangements in connection with merger 

transactions. We are also proposing a 

new Item 24 of Schedule 14A to provide 

disclosure regarding the effect of the 

shareholder votes required by Rule 14a– 

21, including disclosure of the nonbinding nature of the votes. In addition, 

our proposed amendments to Item 5 of 

Schedule 14A, Item 3 of Schedule 14C, 

Item 1011 of Regulation M–A, Item 8 of 

Schedule 14D–9, and Item 15 of 

Schedule 13E–3 would require 

additional disclosure regarding golden 

parachute arrangements in connection 

with mergers, Rule 13e–3 34 goingprivate transactions and tender offers. 

We are also proposing amendments to 

Item 402 of Regulation S–K to address 

the issuer’s response to the shareholder 

vote on executive compensation in 

Compensation Discussion and Analysis, 

and to prescribe disclosure about golden 

parachute compensation arrangements 

in proposed new Item 402(t). Finally, 

we are proposing amendments to Form 

10–K and Form 10–Q to require 

disclosure about whether and how the 

issuer will implement the results of the 

shareholder advisory vote on the 

frequency of shareholder votes on 

executive compensation. 

II. Discussion of the Proposed 

Amendments 

A. Shareholder Approval of Executive 

Compensation 

1. Proposed Rule 14a–21(a) 

We are proposing Rule 14a–21(a), 

pursuant to which issuers 35 would be 

required, not less frequently than once 

every three years, to provide a separate 

shareholder advisory vote in proxy 

statements to approve the compensation 

of executives. Proposed Rule 14a–21(a) 

would specify that the separate 

shareholder vote on executive 

compensation is required only when 

proxies are solicited for an annual or 

other meeting of security holders for 

which our rules require the disclosure 

of executive compensation pursuant to 

Item 402 of Regulation S–K. Proposed 

Rule 14a–21(a) would require a separate 

shareholder vote to approve the 

compensation of executives for the first 

annual or other such meeting of 

shareholders occurring on or after 

January 21, 2011,36 the first day after the 

end of the 6-month period beginning on 

the date of enactment of the Act. 

Proposed Rule 14a–21(a) would 

specify how an issuer must provide a 

separate shareholder advisory vote to 

approve the compensation of its named 

executive officers, as defined in Item 

402(a)(3) 37 of Regulation S–K. In 

accordance with Section 14A(a)(1), 

shareholders would vote to approve the 

compensation of the issuer’s named 

executive officers, as such 

compensation is disclosed in Item 402 38

of Regulation S–K, including the 

Compensation Discussion and Analysis 

(‘‘CD&A’’), the compensation tables and 

other narrative executive compensation 

disclosures required by Item 402.39

Smaller reporting companies 40 are 

subject to scaled executive 

compensation disclosure requirements 

and are not required to include a CD&A. 

Therefore, for smaller reporting 

companies, the shareholders would vote 

to approve the compensation of the 

named executive officers, as disclosed 

under Items 402(m) 41 through 402(q) 42

of Regulation S–K. We are also 

proposing an instruction to new Rule 

14a–21 to specify that Rule 14a–21 does 

not change the scaled disclosure 

requirements for smaller reporting 

companies and that smaller reporting 

companies would not be required to 

provide a CD&A in order to comply with 

Rule 14a–21.43

Consistent with Section 14A, the 

compensation of directors, as disclosed 

pursuant to Item 402(k) 44 and by Item 

402(r) 45 is not subject to the shareholder 

advisory vote. In addition, if an issuer 

includes disclosure pursuant to Item 

402(s) 46 of Regulation S–K about the 

issuer’s compensation policies and 

practices as they relate to risk 

management and risk-taking incentives, 

these policies and practices would not 

be subject to the shareholder advisory 

vote required by Section 14A(a)(1) as 

they relate to the issuer’s compensation 

for employees generally. We note, 

however, that to the extent that risk 

considerations are a material aspect of 

the issuer’s compensation policies or 

decisions for named executive officers, 

the issuer is required to discuss them as 

part of its CD&A,47 and therefore such 

disclosure would be considered by 

shareholders when voting on executive 

compensation. 

Our proposed rule would not require 

issuers to use any specific language or 

form of resolution to be voted on by 

shareholders. However, the shareholder 

vote must relate to all executive 

compensation disclosure set forth 

pursuant to Item 402 of Regulation 

S–K. New Section 14A(a)(1) of the 

Exchange Act requires that the 

shareholder vote must be ‘‘to approve 

the compensation of executives, as 

disclosed pursuant to [Item 402 of 

Regulation S–K] or any successor 

thereto.’’ 48 In our view, a vote to 

approve a proposal on a different 

subject matter, such as a vote to approve 

only compensation policies and 

procedures, would not satisfy the 

requirement of Section 14A(a)(1) or 

proposed Rule 14a–21(a).49

Request for Comment 

(1) Should we include more specific 

requirements regarding the manner in 

which issuers should present the 


jlentini on DSKJ8SOYB1PROD with PROPOSALS3
Federal Register / Vol. 75, No. 208 / Thursday, October 28, 2010 / Proposed Rules 66593 

50Section 951 of the Act establishes a new 

Section 14A(e) of the Exchange Act, which provides 

that we may, by rule or order, exempt an issuer or 

class of issuers from the requirements of Section 

14A(a) and (b). In determining whether to make an 

exemption under this subsection, we are directed to 

take into account, among other considerations, 

whether the requirements of Section 14A(a) and 

14A(b) disproportionately burden small issuers. We 

are also soliciting comment on a number of issues 

relating to smaller reporting companies as 

discussed further in Section II.E below. 

51Section 14A(a) does not require additional 

disclosure with respect to the non-binding nature 

of the vote. We are proposing to require additional 

disclosure so that information about the advisory 

nature of the vote is available to shareholders before 

they vote. 

52See Item 20 of Schedule 14A; TARP Adopting 

Release, supra note 16, at 75 FR 2790. 

53 17 CFR 229.402(b). 

54 Item 402 also includes requirements to disclose 

director compensation (Items 402(k) and 402(r)) and 

the issuer’s compensation policies as they relate to 

risk management (Item 402(s)). As noted above, 

disclosure pursuant to these paragraphs is beyond 

the scope of the shareholder advisory vote to 

approve executive compensation. Similarly, as 

noted in note 38 above, disclosure pursuant to 

proposed Item 402(t) is beyond the scope of the 

shareholder advisory vote to approve executive 

compensation unless the issuer includes that 

disclosure in its annual meeting proxy statement. 

55 17 CFR 240.14a–20. Because companies with 

outstanding indebtedness under the TARP will 

continue to have an annual say-on-pay vote until 

they repay all such indebtedness, we are proposing 

that these votes be addressed by issuers in CD&A 

as well. The treatment of companies subject to 

EESA with outstanding obligations under TARP is 

discussed in Section II.C.3 below. 

56Reporting companies are currently required to 

disclose, pursuant to Item 5.07 of Form 8–K [17 

CFR 249.208a], the results of a shareholder vote 

within four business days after the end of the 

meeting at which the vote is held. We are not 

proposing any additional disclosure on Form 8–K 

for a company to discuss the results of the votes 

required by Exchange Act Section 14A, though 

companies may voluntarily provide additional 

disclosure. 

shareholder vote on executive 

compensation? For example, should we 

designate the specific language to be 

used and/or require issuers to frame the 

shareholder vote to approve executive 

compensation in the form of a 

resolution? If so, what specific language 

or form of resolution should be used? 

(2) Would it be appropriate to exempt 

smaller reporting companies from the 

shareholder vote to approve executive 

compensation? Please explain the 

reasons why an exemption would, or 

would not, be appropriate. Would the 

proposed amendments be 

disproportionately burdensome for 

smaller reporting companies? 50

(3) Should we establish compliance 

dates to phase-in effectiveness of our 

proposed rules? Are there other 

transition issues that our rules should 

address? 

(4) Section 14A(a)(1), like Section 

111(e) of the EESA, does not specify 

which shares are entitled to vote in the 

shareholder vote to approve executive 

compensation, nor does this section 

direct the Commission to adopt rules 

addressing this point. As in our 

implementation of EESA Section 111(e), 

we are not proposing to address this 

question in our rules. Should our rules 

implementing Section 14A(a)(1) address 

this question? If so, how, and on what 

basis? 

2. Proposed Item 24 to Schedule 14A 

We are also proposing a new Item 24 

to Schedule 14A. Pursuant to this item, 

issuers would be required to disclose in 

a proxy statement for an annual meeting 

(or other meeting of shareholders for 

which our rules require executive 

compensation disclosure) that they are 

providing a separate shareholder vote 

on executive compensation and to 

briefly explain the general effect of the 

vote, such as whether the vote is nonbinding.51 This is similar to the 

approach taken by the Commission in 

connection with disclosure 

requirements about the shareholder vote 

on executive compensation for 

companies subject to EESA.52

Request for Comment 

(5) Are there other disclosures that 

should be provided by issuers regarding 

the shareholder vote on executive 

compensation? If so, what kinds of 

disclosure would be useful to 

shareholders? 

3. Proposed Amendments to Item 

402(b) 53 of Regulation S–K 

In connection with our 

implementation of Section 14A(a)(1), we 

are also proposing amendments to Item 

402(b) of Regulation S–K. Item 402 

requires the disclosure of executive 

compensation and includes 

requirements prescribing narrative and 

tabular disclosure, as well as separate 

scaled disclosure requirements for 

smaller reporting companies.54 Item 

402(b) contains the CD&A requirement. 

CD&A is intended to be a narrative 

overview that puts into context the 

executive compensation disclosure 

provided elsewhere in response to the 

requirements of Item 402. The CD&A 

disclosure requirement is principlesbased, in that it identifies the disclosure 

concept and provides several nonexclusive examples. Under Item 

402(b)(1), issuers must explain all 

material elements of their named 

executive officers’ compensation by 

addressing mandatory principles-based 

topics in their CD&A: 

• What are the objectives of the 

company’s compensation programs? 

• What is the compensation program 

designed to reward? 

• What is each element of 

compensation? 

• Why does the company choose to 

pay each element? 

• How does the company determine 

the amount (and, where applicable, the 

formula) for each element? 

• How do each element and the 

company’s decisions regarding that 

element fit into the company’s overall 

compensation objectives and affect 

decisions regarding other elements? 

Item 402(b)(2) of Regulation S–K sets 

forth certain non-exclusive examples of 

the kind of information that an issuer 

should address in its CD&A, depending 

upon the facts and circumstances. 

Our proposals would amend Item 

402(b) to require issuers to address in 

CD&A whether and, if so, how their 

compensation policies and decisions 

have taken into account the results of 

shareholder advisory votes on executive 

compensation. This proposed new 

disclosure is not mandated by Section 

951 of the Act, but we believe that a 

requirement to provide that information 

would facilitate better investor 

understanding of issuers’ compensation 

decisions. We note that the shareholder 

advisory vote on executive 

compensation will apply to all issuers, 

and as a result, we view information 

about how issuers have responded to 

such votes as more in the nature of a 

mandatory principles-based topic than 

an example. The manner in which 

individual issuers may respond to such 

votes in determining executive 

compensation policies and decisions 

will likely vary depending upon facts 

and circumstances. Accordingly, the 

proposal would amend Item 402(b)(1) to 

require issuers to address in CD&A 

whether, and if so, how they have 

considered the results of previous 

shareholder votes on executive 

compensation required by Section 14A 

and Rule 14a–20 55 in determining 

compensation policies and decisions 

and, if so, how that consideration has 

affected their compensation policies and 

decisions.56

Smaller reporting companies are 

subject to scaled disclosure 

requirements in Item 402 of Regulation 

S–K and are not required to include a 

CD&A. We are not proposing to add a 

specific requirement for smaller 

reporting companies to provide 

disclosure about how previous votes 

pursuant to Section 14A affected 

compensation policies and decisions 

because we believe such information 

would not be as valuable outside the 

context of a complete CD&A covering 

the full range of matters required to be 


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66594 Federal Register / Vol. 75, No. 208 / Thursday, October 28, 2010 / Proposed Rules 

57 17 CFR 229.402(o). 

58Exchange Act Section 14A(a)(2). 

59As discussed above in note 16, proposed Rule 

14a–21(b) would require issuers to conduct the 

required advisory vote in connection with the 

election of directors, when our rules call for 

disclosure of executive compensation. In our view, 

a separate shareholder vote on the frequency of 

shareholder votes on executive compensation is 

required only with respect to an annual meeting of 

shareholders for which proxies will be solicited for 

the election of directors or a special meeting in lieu 

of such annual meeting. 

60See Section II.C.3 below for a discussion of the 

application of this section to companies subject to 

EESA with outstanding obligations under TARP. 

61As discussed above in note 51, Section 14A(a) 

does not require additional disclosure with respect 

to the non-binding nature of the vote. We are 

proposing to require additional disclosure so that 

information about the advisory nature of the vote 

is available to shareholders before they vote. 

addressed by Item 402(b). However, we 

note that pursuant to Item 402(o) 57 of 

Regulation S–K, smaller reporting 

companies are required to provide a 

narrative description of any material 

factors necessary to an understanding of 

the information disclosed in the 

Summary Compensation Table. If 

consideration of prior executive 

compensation advisory votes is such a 

factor for a particular issuer, disclosure 

would be required pursuant to Item 

402(o). 

Request for Comment 

(6) Should we amend Item 402(b) to 

require disclosure of the consideration 

of the results of the shareholder 

advisory vote on executive 

compensation in CD&A as proposed? If 

not, please explain why not. 

(7) Should the requirement to discuss 

the issuer’s consideration of the results 

of the shareholder vote be included in 

Item 402(b)(1) as a mandatory 

principles-based topic, as proposed, or 

should it be included in Item 402(b)(2) 

as a non-exclusive example of 

information that should be addressed, 

depending upon materiality under the 

individual facts and circumstances? In 

this regard, commentators should 

explain the reasons why they 

recommend either approach. 

(8) Should the proposed requirement 

for CD&A discussion of the issuer’s 

consideration of previous shareholder 

advisory votes be revised to relate only 

to consideration of the most recent 

shareholder advisory votes? 

(9) For smaller reporting companies, 

should we instead require disclosure to 

address the consideration of previous 

shareholder advisory votes on executive 

compensation? Would such information 

be valuable outside the context of a 

complete CD&A? Would the existing 

requirements under Item 402(o) of 

Regulation S–K, pursuant to which 

smaller reporting companies must 

provide a narrative disclosure of any 

material factors necessary to an 

understanding of the information 

disclosed in the Summary 

Compensation Table, be sufficient 

information for investors in smaller 

reporting companies? 

B. Shareholder Approval of the 

Frequency of Shareholder Votes on 

Executive Compensation 

1. Proposed Rule 14a–21(b) 

Under proposed Rule 14a–21(b), 

issuers would be required, not less 

frequently than once every six years, to 

provide a separate shareholder advisory 

vote in proxy statements for annual 

meetings to determine whether the 

shareholder vote on the compensation 

of executives required by Section 

14A(a)(1) ‘‘will occur every 1, 2, or 3 

years.’’ 58 Proposed Rule 14a–21(b) 

would also clarify that the separate 

shareholder vote on the frequency of 

shareholder votes on executive 

compensation would be required only 

in a proxy statement solicited for an 

annual or other meeting of shareholders 

for which our rules require 

compensation disclosure.59 Under 

proposed Rule 14a–21(b), issuers would 

be required to provide the separate 

shareholder vote on the frequency of the 

say-on-pay vote for the first annual or 

other such meeting of shareholders 

occurring on or after January 21, 2011.60

Request for Comment 

(10) Should we include more specific 

requirements regarding the manner in 

which issuers should present the 

shareholder vote on the frequency of 

shareholder votes on executive 

compensation? For example, should we 

designate the specific language to be 

used and/or require issuers to frame the 

shareholder vote on the frequency of 

shareholder votes to approve executive 

compensation in the form of a 

resolution? If so, what specific language 

or form of resolution should be used? 

(11) Should a new issuer be permitted 

to disclose the frequency of its say-onpay votes in the registration statement 

for its initial public offering and be 

exempted from conducting say-on-pay 

and frequency votes until the year 

disclosed? For example, if an issuer 

discloses in its initial public offering 

prospectus that it will conduct a say-onpay vote every two years, should we 

exempt it from the requirements of 

Section 14A(a)(1) and 14A(a)(2) for its 

first annual meeting as a reporting 

company? 

(12) Section 14A(a)(2) does not 

specify which shares are entitled to vote 

in the shareholder vote on the frequency 

of the shareholder vote to approve 

executive compensation, nor does this 

section direct the Commission to adopt 

rules addressing this point. We are not 

proposing to address this question in 

our rules, but should our rules 

implementing Section 14A(a)(2) address 

this question? If so, how, and on what 

basis? 

2. Proposed Item 24 of Schedule 14A 

In addition to disclosure regarding the 

vote on executive compensation, issuers 

would be required to disclose in the 

proxy statement that they are providing 

a separate shareholder advisory vote on 

the frequency of the shareholder 

advisory vote on executive 

compensation. Item 24 of Schedule 14A 

would also require issuers to briefly 

explain the general effect of this vote, 

such as whether the vote is nonbinding.61 As noted above, this is 

similar to the approach taken by the 

Commission in connection with 

disclosure requirements about the 

shareholder vote on executive 

compensation for companies subject to 

EESA. 

Request for Comment 

(13) Should we require disclosure 

about the general effect of this 

shareholder advisory vote? Is such 

disclosure useful to shareholders? 

(14) Are there other disclosures that 

should be provided by issuers regarding 

the shareholder vote on the frequency of 

say-on-pay votes? If so, what kinds of 

disclosure would be useful to 

shareholders? 

3. Proposed Amendment to Rule 14a–4 

Section 14A(a)(2) requires a 

shareholder advisory vote on whether 

say-on-pay votes will occur every 1, 2, 

or 3 years. Thus, shareholders must be 

given four choices: Whether the 

shareholder vote on executive 

compensation will occur every 1, 2, or 

3 years, or to abstain from voting on the 

matter. In our view, Section 14A(a)(2) 

does not allow for alternative 

formulations of the shareholder vote, 

such as proposals that would provide 

shareholders with two substantive 

choices (e.g., to hold a separate 

shareholder vote on executive 

compensation every year or less 

frequently), or only one choice (e.g., a 

company proposal to hold shareholder 

votes every two years). We would 

expect that the board of directors will 

include a recommendation as to how 

shareholders should vote on the 

frequency of shareholder votes on 


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62Because the shareholder vote on the frequency 

of voting on executive compensation is advisory, 

we do not believe that it is necessary to prescribe 

a standard for determining which frequency has 

been ‘‘adopted’’ by the shareholders. As discussed 

in the following section, however, for purposes of 

Rule 14a–8 we are proposing that an issuer may 

exclude as ‘‘substantially implemented’’ a 

shareholder proposal that seeks a say-on-pay vote 

or that relates to the frequency of say-on-pay votes 

only if the issuer has implemented a say-on-pay 

voting frequency that is consistent with the vote of 

a plurality of the votes cast. For that rule, we are 

proposing a plurality standard because the proxy 

card will have three substantive choices (1, 2, or 3 

years), and as a consequence there may be 

situations where none of these three frequencies has 

been supported by a majority of the votes cast or 

shares represented at a meeting. 

63Rule 14a–4(b)(1). 

64These substantive bases for exclusion are set 

forth in Rule 14a–8(i). 

65More specifically, to exclude such shareholder 

proposals, the issuer must have adopted the voting 

frequency receiving the greatest number of votes in 

the most recent advisory vote on the frequency of 

say-on-pay votes. We are prescribing this voting 

standard solely for purposes of determining the 

scope of the exclusion under Rule 14a–8(i)(10), and 

not for the purpose of determining whether a 

particular voting frequency should be considered to 

have been adopted or approved by shareholder vote 

as a matter of state law. 

66A shareholder proposal that proposes a 

periodic say-on-pay vote would not be excludable 

under Rule 14–8(i)(10) if the issuer does not adopt 

a frequency policy that is consistent with the 

plurality of votes cast in the most recent 

shareholder vote pursuant to Rule 14a–21(b). 

executive compensation. However, the 

issuer must make clear in these 

circumstances that the proxy card 

provides for four choices (every 1, 2, or 

3 years, or abstain) and that 

shareholders are not voting to approve 

or disapprove the issuer’s 

recommendation. Accordingly, we are 

proposing amendments to our proxy 

rules to reflect the statutory requirement 

that shareholders must be provided the 

opportunity to cast an advisory vote on 

whether the shareholder vote on 

executive compensation required by 

Section 14A(a)(1) of the Exchange Act 

will occur every 1, 2, or 3 years, or to 

abstain from voting on the matter.62

Specifically, we are proposing 

amendments to Rule 14a–4 under the 

Exchange Act, which provides 

requirements as to the form of proxy 

that issuers are required to include with 

their proxy materials, to require that 

issuers present four choices to their 

shareholders. Under existing Rule 

14a–4, the form of proxy is required to 

provide means whereby the person 

solicited is afforded an opportunity to 

specify by boxes a choice between 

approval or disapproval of, or 

abstention with respect to each separate 

matter to be acted upon, other than 

elections to office.63 The proposed 

amendments would revise this standard 

to permit proxy cards to reflect the 

choice of 1, 2, or 3 years, or abstain, for 

these votes. 

Request for Comment 

(15) Will the four choices available to 

shareholders for the frequency of 

shareholder votes on executive 

compensation be sufficiently clear? 

(16) Will issuers, brokers, transfer 

agents, and data processing firms be 

able to accommodate four choices (i.e., 

1, 2, or 3 years, or abstain) for a single 

line item on a proxy card? What 

technical or processing difficulties do 

such a change to the proxy card present? 

If there are technical or processing 

difficulties, are there practical ways to 

mitigate them? 

4. Proposed Amendment to Rule 14a–8 

We are also proposing an amendment 

to Rule 14a–8 under the Exchange Act 

to add a note to Rule 14a–8(i)(10) that 

would clarify the status of shareholder 

proposals that seek an advisory 

shareholder vote on executive 

compensation or that relate to the 

frequency of shareholder votes 

approving executive compensation. 

Rule 14a–8 provides eligible 

shareholders with an opportunity to 

include a proposal in an issuer’s proxy 

materials for a vote at an annual or 

special meeting of shareholders. An 

issuer generally is required to include 

the proposal unless the shareholder has 

not complied with the rule’s procedural 

requirements or the proposal falls 

within one of the rule’s 13 substantive 

bases for exclusion.64 One of the 

substantive bases for exclusion, Rule 

14a–8(i)(10), provides that an issuer 

may exclude a shareholder proposal that 

has already been substantially 

implemented. 

We believe that under certain 

conditions, an issuer’s response to the 

say-on-pay and related frequency votes 

in Section 951 of the Act may be viewed 

as having substantially implemented 

subsequent shareholder proposals that 

seek a vote on the same matters. We are 

proposing to add a new note to Rule 

14a–8(i)(10) to permit the exclusion of 

a shareholder proposal that would 

provide a say-on-pay vote or seeks 

future say-on-pay votes or that relates to 

the frequency of say-on-pay votes, 

provided the issuer has adopted a policy 

on the frequency of say-on-pay votes 

that is consistent with the plurality of 

votes cast in the most recent vote in 

accordance with Rule 14a–21(b).65 As 

noted in Section I above, a ‘‘say-on-pay’’ 

vote is defined as a separate resolution 

subject to shareholder vote to approve 

the compensation of executives, as 

disclosed pursuant to Item 402 of 

Regulation S–K, or any successor to 

Item 402. 

As a result of this proposed 

amendment, if an issuer implements the 

results of the advisory vote of its 

shareholders as to how often it will 

solicit votes to approve the 

compensation of its executives, it would 

be permitted to exclude shareholder 

proposals that propose a vote on the 

approval of executive compensation as 

disclosed pursuant to Item 402 of 

Regulation S–K or on the frequency of 

such votes, including those drafted as 

requests to amend the issuer’s governing 

documents, so long as the issuer has 

adopted a policy on the frequency of 

say-on-pay votes that is consistent with 

the plurality of votes cast in the most 

recent vote required by Rule 14a–21(b) 

and provides a vote on frequency at 

least as often as required by Section 

14A(a)(2). For example, if in the first 

vote under Rule 14a–21(b) the largest 

number of votes were cast for a two-year 

frequency for future shareholder votes 

on executive compensation, and the 

issuer discloses that it has approved a 

policy to hold the vote every two years, 

a shareholder proposal seeking a 

different frequency could be excluded 

so long as the issuer seeks votes on 

executive compensation every two years 

and provides a vote on frequency at 

least every six years as required by 

Section 14A(a)(2). 

We believe that, in these 

circumstances, additional shareholder 

proposals on frequency generally would 

unnecessarily burden the company and 

its shareholders given the company’s 

substantial implementation of a 

plurality shareholder vote regarding the 

frequency of say-on-pay votes. For the 

same reasons, a shareholder proposal 

that would provide an advisory vote or 

seek future advisory votes on executive 

compensation with substantially the 

same scope as the vote required by Rule 

14a–21(a) would be subject to exclusion 

under Rule 14a–8(i)(10).66

Section 14A(c)(4) provides that the 

shareholder advisory votes required by 

Sections 14A(a) and (b) may not be 

construed ‘‘to restrict or limit the ability 

of shareholders to make proposals for 

inclusion in proxy materials related to 

executive compensation.’’ As proposed 

to be amended, Rule 14a–8(i)(10) would 

only provide a basis for exclusion of a 

say-on-pay proposal if the company has 

adopted a policy on the frequency of 

say-on-pay votes that is consistent with 

the plurality of votes cast in the most 

recent shareholder vote. Otherwise, 

simply having the required vote on 

frequency would not restrict or limit the 

ability of a shareholder to have a say-onVerDate Mar<15>2010 20:01 Oct 27, 2010 Jkt 223001 PO 00000 Frm 00007 Fmt 4701 Sfmt 4702 E:\FR\FM\28OCP3.SGM 28OCP3

jlentini on DSKJ8SOYB1PROD with PROPOSALS3
66596 Federal Register / Vol. 75, No. 208 / Thursday, October 28, 2010 / Proposed Rules 

67A company may, but is not required to, provide 

additional disclosure in Item 5.07 of Form 8–K 

regarding any of the shareholder votes required by 

Section 951 of the Act and how the results of these 

votes affect its plans for the future. 

68Exchange Act Section 14A(c). 

69Even though each of the shareholder advisory 

votes required by Section 14A is non-binding 

pursuant to the rule of construction in Section 

14A(c), we believe these votes could play a role in 

an issuer’s executive compensation decisions. 

pay proposal included in the company’s 

proxy materials. 

Request for Comment 

(17) Is it necessary or appropriate to 

prescribe a standard, such as a plurality, 

as proposed, for resolving whether 

issuers have substantially implemented 

the shareholders’ vote on the frequency 

of the vote on executive compensation 

for purposes of Rule 14a–8? Is a 

standard other than plurality 

appropriate? Should the standard vary if 

the company’s capital structure includes 

multiple classes of voting stock (e.g., 

where classes elect different subsets of 

the board of directors)? 

(18) Is the proposed amendment to 

Rule 14a–8(i)(10) appropriate? Should 

we, as proposed, allow the exclusion of 

shareholder proposals that propose sayon-pay votes with substantially the 

same scope as the votes required by 

Rule 14a–21(a)? If not, please explain 

why not. 

(19) Should we, as proposed, permit 

the exclusion of shareholder proposals 

that seek to provide say-on-pay votes 

more or less regularly than the 

frequency endorsed by a plurality of 

votes cast in the most recent vote 

required under Rule 14a–21(b), as 

described above? Are there other 

circumstances under which shareholder 

proposals relating to the frequency of 

say-on-pay votes should be considered 

substantially implemented and subject 

to exclusion under Rule 14a–8(i)(10)? 

(20) Should we amend Rule 14a– 

8(i)(10) to address other specific factual 

scenarios that are likely to occur as a 

result of the implementation of Section 

951 and our related rules? Are there 

other specific facts and circumstances 

under which Rule 14a–8(i)(10) should 

permit or prohibit the exclusion of 

shareholder proposals that seek say-onpay votes? 

(21) Should the proposed note to Rule 

14a–8(i)(10) be available if the issuer 

has materially changed its 

compensation program in the time 

period since the most recent say-on-pay 

vote required by Section 14A(a)(1) and 

Rule 14a–21(a) or the most recent 

frequency vote required by Section 

14A(a)(2) and Rule 14a–21(b)? 

5. Proposed Amendments to Form 

10–K and Form 10–Q 

Issuers are currently required to 

disclose the results of shareholder votes 

pursuant to Item 5.07 of Form 8–K 

within four business days following the 

day the shareholder meeting ends. The 

rules we propose today would not alter 

this requirement. We are proposing 

amendments to Form 10–K and Form 

10–Q to require additional disclosure 

regarding the issuer’s action as a result 

of the shareholder vote on the frequency 

of shareholder votes on executive 

compensation in accordance with 

Section 14A.67

Our proposed amendments to Item 9B 

of Form 10–K and new Item 5(c) of Part 

II of Form 10–Q would require an issuer 

to disclose, in the quarterly report on 

Form 10–Q covering the period during 

which the shareholder advisory vote 

occurs, or in the annual report on Form 

10–K if the shareholder advisory vote 

occurs during the issuer’s fourth 

quarter, its decision regarding how 

frequently it will conduct shareholder 

advisory votes on executive 

compensation in light of the results of 

the shareholder vote on frequency. 

Because the shareholder vote to 

determine the frequency of shareholder 

votes on executive compensation is 

advisory and non-binding on the issuer, 

we are proposing disclosure in the Form 

10–Q (or the Form 10–K for shareholder 

meetings taking place during the fourth 

quarter) to notify shareholders on a 

timely basis whether the issuer’s 

determination regarding frequency will 

follow the results of the shareholder 

vote. 

Request for Comment 

(22) Should we require, as proposed, 

disclosure in a Form 10–Q or Form 

10–K regarding the issuer’s plans with 

respect to the frequency of its 

shareholder votes to approve executive 

compensation? Would this disclosure be 

useful for investors? 

(23) Would the proposed Form 10–Q 

or Form 10–K disclosure notify 

shareholders on a timely basis of the 

issuer’s determination regarding the 

frequency of the say-on-pay vote? 

Should this disclosure instead be 

included in the Form 8–K reporting the 

voting results otherwise required to be 

filed within four business days after the 

end of the shareholder meeting, or in a 

separate Form 8–K required to be filed 

within four business days of when an 

issuer determines how frequently it will 

conduct shareholder votes on executive 

compensation in light of the results of 

the shareholder vote on frequency? 

(24) Would the amendments to Form 

10–Q and 10–K, as proposed, allow an 

issuer sufficient time to analyze the 

results of the shareholder votes on the 

frequency of shareholder votes on 

executive compensation and reach a 

conclusion on how it should respond? 

Should the issuer’s plans with respect to 

the frequency of such shareholder votes 

instead be required to be disclosed no 

later than in the Form 10–Q or Form 

10–K for the next full time period ended 

subsequent to the vote (for example, if 

the vote occurs in the second quarter of 

the issuer’s fiscal year, the disclosure 

would be required no later than in the 

Form 10–Q for the third quarter)? 

6. Effect of Shareholder Vote 

Although the language in Section 951 

of the Act indicates that the separate 

resolution subject to shareholder vote is 

‘‘to determine’’ the frequency of the 

shareholder vote on executive 

compensation, in light of new Section 

14A(c) of the Exchange Act, we believe 

this shareholder vote, and all 

shareholder votes required by Section 

951 of the Act, are intended to be nonbinding on the issuer or the issuer’s 

board of directors. Under new Section 

14A(c), the shareholder votes referred to 

in Section 14A(a) and Section 14A(b) 

(which includes all votes under Section 

951 of the Act) ‘‘shall not be binding on 

the issuer or the board of directors of an 

issuer.’’ 68 As proposed, new Item 24 of 

Schedule 14A would include language 

to require disclosure regarding the 

general effect of the shareholder 

advisory votes, such as whether the vote 

is non-binding.69

Request for Comment 

(25) Under the proposed rules, the 

shareholder vote on the frequency of the 

say-on-pay vote would not bind the 

issuer or board of directors of the issuer. 

Are there other ways to provide for a 

vote ‘‘to determine’’ the frequency of the 

say-on-pay resolution that are consistent 

with the Section 14A(c) rule of 

construction that the vote ‘‘shall not be 

binding’’? 

C. Issues Relating to Both Shareholder 

Votes Required by Section 14A(a) 

1. Proposed Amendments to Rule 

14a–6 

Rule 14a–6(a) generally requires 

issuers to file proxy statements in 

preliminary form at least ten calendar 

days before definitive proxy materials 

are first sent to shareholders, unless the 

items included for a shareholder vote in 

the proxy statement are limited to 

specified matters. During the time 

before final proxy materials are filed, 

our staff has the opportunity to 

comment on the disclosures and issuers 


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70Rules 14a–6(a)(5) and (6) specify other 

proposals by investment companies registered 

under the Investment Company Act of 1940 [15 

U.S.C. 80a–1 et seq.], the inclusion of which does 

not compel filing of preliminary materials. 

71See Rule 14a–6(a)(7) [17 CFR 240.14a–6(a)(7)]. 

72 In our view, a preliminary filing requirement 

for the shareholder votes on executive 

compensation and the frequency of such votes 

would impose unnecessary administrative burdens 

and preparation and processing costs associated 

with the filing and processing of proxy material that 

would unlikely be selected for review in 

preliminary form. See Proxy Rules—Amendments 

to Eliminate Filing Requirements for Certain 

Preliminary Proxy Material; Amendments With 

Regard to Rule 14a–8, Shareholder Proposals, 

Release No. 34–25217 (Dec. 21, 1987) [52 FR 

48982]. 

73 In the recent release relating to the similar 

shareholder votes for companies subject to EESA 

with outstanding indebtedness under the TARP 

program, we received comments regarding whether 

a preliminary proxy statement should be required 

for shareholder votes on executive compensation 

for TARP companies. While some commentators 

argued that a preliminary proxy statement should 

be required, other commentators argued 

persuasively that the burdens of such an approach 

outweighed the costs. As a result, we decided to 

eliminate the requirement for a preliminary proxy 

statement for shareholder votes on executive 

compensation for TARP companies. See TARP 

Adopting Release, supra note 16, at 75 FR 2791. 

74 15 U.S.C. 78f(b). 

75See, e.g., Notice of Filing and Order Granting 

Accelerated Approval of a Proposed Rule Change to 

Amend NYSE Rule 452 and Listed Company 

Manual Section 402.08 to Eliminate Broker 

Discretionary Voting on Executive Compensation 

Matters, Release No. 34–62874, SR–NYSE–2010–59 

(Sept. 9, 2010). 

76Broker discretionary voting in connection with 

merger or acquisition transactions is not permitted 

under current rules of the national securities 

exchanges. See, e.g., NYSE Rule 452. 

77Section 111(e) of the Emergency Economic 

Stabilization Act of 2008, 12 U.S.C. 5221. See also 

Rule 14a–20. 

are able to incorporate the staff’s 

comments in their final proxy materials. 

However, an issuer is not required to 

file preliminary materials if the only 

matters to be acted upon are: 

• The election of directors, 

• The election, approval or 

ratification of the accountants, 

• Approval or ratification of certain 

employee benefits plans or plan 

amendments, 

• Shareholder proposals under Rule 

14a–8,70 and 

• Shareholder votes to approve 

executive compensation for companies 

with outstanding indebtedness under 

the TARP, in accordance with the 

EESA.71

Absent an amendment to Rule 14a– 

6(a), a proxy statement that includes a 

solicitation for either the shareholder 

vote on the approval of executive 

compensation or the approval of the 

frequency of the votes approving 

executive compensation required by 

Sections 14A(a)(1) and 14A(a)(2) would 

need to be filed in preliminary form. 

Because the shareholder vote on 

executive compensation and the 

shareholder vote on the frequency of 

such shareholder votes would be 

required for all issuers, we view them as 

similar to the other items specified in 

Rule 14a–6(a) that do not require a 

preliminary filing.72

We are proposing to amend Rule 

14a–6(a) to add the shareholder votes on 

executive compensation and the 

frequency of shareholder votes on 

executive compensation required by 

Section 14A(a) to the list of items that 

do not trigger a preliminary filing.73

Under the proposed amendments, a 

proxy statement that includes a 

solicitation with respect to either of 

these shareholder votes would not 

trigger a requirement that the issuer file 

the proxy statement in preliminary 

form, so long as any other matters to 

which the solicitation relates include 

only the other matters specified by Rule 

14a–6(a). 

Request for Comment 

(26) Should we amend Rule 14a–6(a) 

under the Exchange Act as proposed so 

that issuers are not required to file a 

preliminary proxy statement as a 

consequence of providing a separate 

shareholder vote on executive 

compensation in accordance with Rule 

14a–21(a)? If not, please explain why 

not. 

(27) Should we amend Rule 14a–6(a) 

under the Exchange Act as proposed so 

that issuers are not required to file a 

preliminary proxy statement as a 

consequence of providing a separate 

shareholder vote on the frequency of 

shareholder votes on executive 

compensation in accordance with Rule 

14a–21(b)? If not, please explain why 

not. 

(28) Should we amend Rule 14a–6(a) 

under the Exchange Act so that issuers 

are not required to file a preliminary 

proxy statement as a consequence of 

providing any other separate 

shareholder vote on executive 

compensation? If so, please explain in 

what circumstances. 

2. Broker Discretionary Voting 

Section 957 of the Act amends 

Section 6(b) of the Exchange Act 74 to 

direct national securities exchanges to 

change their rules to prohibit broker 

discretionary voting of uninstructed 

shares in certain matters, including 

shareholder votes on executive 

compensation. The national securities 

exchanges have begun to amend their 

rules regarding broker discretionary 

voting on executive compensation 

matters to implement this 

requirement.75 Under these amended 

exchange rules, for issuers with a class 

of securities listed on a national 

securities exchange, broker 

discretionary voting of uninstructed 

shares would not be permitted for a 

shareholder vote on executive 

compensation or a shareholder vote on 

the frequency of the shareholder vote on 

executive compensation.76

3. Relationship to Shareholder Votes on 

Executive Compensation for TARP 

Companies 

Issuers that have received financial 

assistance under the Troubled Asset 

Relief Program, or TARP, are required to 

conduct a separate annual shareholder 

vote to approve executive compensation 

during the period in which any 

obligation arising from the financial 

assistance provided under the TARP 

remains outstanding.77

Because the vote required to approve 

executive compensation pursuant to the 

Emergency Economic Stabilization Act 

of 2008, or EESA, is effectively the same 

vote that would be required under 

Section 14A(a)(1), we believe that a 

shareholder vote to approve executive 

compensation under Rule 14a–20 for 

issuers with outstanding indebtedness 

under the TARP would satisfy Rule 

14a–21(a). Consequently, we would not 

require issuers who conduct an annual 

shareholder vote to approve executive 

compensation pursuant to EESA to 

conduct a separate shareholder vote on 

executive compensation under Section 

14A(a)(1) until such issuers have repaid 

all indebtedness under the TARP. These 

issuers would be required to include a 

separate shareholder advisory vote on 

executive compensation pursuant to 

Section 14A(a)(1) and proposed Rule 

14a–21(a) for the first annual meeting of 

shareholders after the issuer has repaid 

all outstanding indebtedness under the 

TARP. 

Even though issuers with outstanding 

indebtedness under the TARP have a 

separate statutory requirement to 

provide an annual shareholder vote on 

executive compensation so long as they 

are indebted under the TARP, these 

issuers would be required, pursuant to 

Section 14A(a)(2) of the Exchange Act, 

to provide a separate shareholder 

advisory vote on the frequency of 

shareholder votes on executive 

compensation for the first annual or 

other such meeting of shareholders on 

or after January 21, 2011. In our view, 

however, because such issuers have a 

requirement to conduct an annual 

shareholder advisory vote on executive 

compensation so long as they are 

indebted under the TARP, a shareholder 


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66598 Federal Register / Vol. 75, No. 208 / Thursday, October 28, 2010 / Proposed Rules 

78Exchange Act Section 14A(e) provides that ‘‘the 

Commission may, by rule or order, exempt an issuer 

or class of issuers from the requirement’’ under 

Sections 14A(a) or 14A(b). Section 14A(e) further 

provides that ‘‘in determining whether to make an 

exemption under this subsection, the Commission 

shall take into account, among other considerations, 

whether the requirements under [Section 14A(a) 

and 14A(b)] disproportionately burdens small 

issuers.’’ In proposing the exemption, the 

Commission considered whether the requirements 

of Section 14A(a) and (b) as applied to TARP 

recipients to conduct a shareholder advisory vote 

on the frequency of say-on-pay votes could 

disproportionately burden small issuers. As 

described further in Section II.E below, we have 

also considered whether the provision as a whole 

disproportionately burdens small issuers. We note, 

in addition, that to the extent a TARP recipient is 

a small issuer, it would be subject to the exemption. 

79 15 U.S.C. 78 mm(a)(1). Exchange Act Section 

36(a)(1) provides that ‘‘the Commission, by rule, 

regulation, or order, may conditionally or 

unconditionally exempt any person, security, or 

transaction, or any class of persons, securities, or 

transactions, from any provision or provisions of 

this title or of any rule or regulation thereunder, to 

the extent that such exemption is necessary or 

appropriate in the public interest, and is consistent 

with the protection of investors.’’ 

80Exchange Act Section 14A(b)(1). 

81 Item 5 of Schedule 14A. 

82See Item 402(j) of Regulation S–K [17 CFR 

229.402(j)], Item 8 of Schedule 14A, and Item 11 of 

Form 10–K. Item 402(j) disclosure is required in 

both Annual Reports on Form 10–K and in annual 

meeting proxy statements, though such disclosure 

is typically provided in annual meeting proxy 

statements and incorporated into the Form 10–K by 

reference pursuant to General Instruction G(3) of 

Form 10–K. References to ‘‘annual meeting proxy 

statements’’ in this context are meant to encompass 

both locations for the disclosure. 

advisory vote on the frequency of such 

votes while the issuer remains subject to 

a requirement to conduct such votes on 

an annual basis would not serve a useful 

purpose. 

We have considered, therefore, 

whether issuers with outstanding 

indebtedness under the TARP should be 

subject to the requirements of Section 

14A(a)(2) of the Exchange Act. We do 

not believe it is necessary or appropriate 

in the public interest or consistent with 

the protection of investors to require an 

issuer to conduct a shareholder advisory 

vote on the frequency of the shareholder 

advisory vote on executive 

compensation when the issuer already 

is required to conduct advisory votes on 

executive compensation annually 

regardless of the outcome of such 

frequency vote. Because Section 

14A(a)(2) would burden TARP issuers 

and their shareholders with an 

additional vote while providing little 

benefit to either the issuer or its 

shareholders, we believe an exemption 

by rule is appropriate, pursuant to both 

the exemptive authority granted by 

Section 14A(e) of the Exchange Act 78

and the Commission’s general 

exemptive authority pursuant to Section 

36(a)(1) of the Exchange Act.79 As a 

result, Rule 14a–21(b), as proposed, 

would exempt issuers with outstanding 

indebtedness under the TARP from the 

requirements of Rule 14a–21(b) and 

Section 14A(a)(2) until the issuer has 

repaid all outstanding indebtedness 

under the TARP. Similar to the 

approach for shareholder advisory votes 

under Rule 14a–21(a), these issuers 

would be required to include a separate 

shareholder advisory vote on the 

frequency of shareholder advisory votes 

on executive compensation pursuant to 

Section 14A(a)(2) and proposed Rule 

14a–21(b) for the first annual meeting of 

shareholders after the issuer has repaid 

all outstanding indebtedness under the 

TARP. 

Request for Comment 

(29) Should issuers who have 

outstanding indebtedness under the 

TARP be required to conduct a 

shareholder advisory vote under Rule 

14a–21(a) for the first annual meeting 

after the issuer has repaid all 

outstanding indebtedness under the 

TARP? Should we amend Rule 14a–20 

to reflect this requirement? 

(30) Should issuers who have 

outstanding indebtedness under the 

TARP satisfy Rule 14a–21(a) when such 

issuers conduct a shareholder advisory 

vote to approve executive compensation 

pursuant to Rule 14a–20? Should we 

reflect this position in Rule 14a–21(a)? 

(31) Should issuers who have 

outstanding indebtedness under the 

TARP be exempted, as proposed, from 

the requirement to conduct a 

shareholder advisory vote under Section 

14A(a)(2) and Rule 14a–21(b) until the 

first annual meeting after the issuer has 

repaid all outstanding indebtedness 

under the TARP? Is our proposed 

approach consistent with the purposes 

of Section 951 of the Act? Instead, 

should issuers who have outstanding 

indebtedness under the TARP be 

required to provide the shareholder vote 

on frequency at a time when they are 

still required to provide an annual vote 

under EESA? Should such an issuer be 

permitted, at its discretion, to conduct 

a shareholder advisory vote on 

frequency while it has outstanding 

indebtedness under the TARP and, if 

such vote is held, not be required to 

conduct such a vote at its first annual 

meeting after it has repaid all 

outstanding indebtedness under the 

TARP? 

D. Disclosure of Golden Parachute 

Arrangements and Shareholder 

Approval of Golden Parachute 

Arrangements 

1. General 

Section 14A(b)(1) of the Exchange Act 

requires all persons making a proxy or 

consent solicitation seeking shareholder 

approval of an acquisition, merger, 

consolidation or proposed sale or 

disposition of all or substantially all of 

an issuer’s assets to provide disclosure, 

in accordance with rules we 

promulgate, of any agreements or 

understandings that the soliciting 

person has with its named executive 

officers (or that it has with the named 

executive officers of the acquiring 

issuer) concerning compensation that is 

based on or otherwise relates to the 

merger transaction. In addition, Section 

14A(b)(1) requires disclosure of any 

agreements or understandings that an 

acquiring issuer has with its named 

executive officers and that it has with 

the named executive officers of the 

target company in transactions in which 

the acquiring issuer is making a proxy 

or consent solicitation in seeking 

shareholder approval of an acquisition, 

merger, consolidation or proposed sale 

or disposition of all or substantially all 

of an issuer’s assets. Section 14A(b)(1) 

of the Exchange Act requires the 

disclosure to be in a ‘‘clear and simple 

form in accordance with regulations to 

be promulgated by the Commission’’ and 

to include ‘‘the aggregate total of all such 

compensation that may (and the 

conditions upon which it may) be paid 

or become payable to or on behalf of 

such executive officer.’’ 80

Under existing Commission rules, a 

target company soliciting shareholder 

approval of a merger is required to 

describe briefly any substantial interest, 

direct or indirect, by security holdings 

or otherwise, of any person who has 

been an executive officer or director 

since the beginning of the last fiscal year 

in any matter to be acted upon.81 In 

response to this requirement, target 

companies often include disclosure in 

their proxy statements about 

compensation arrangements that may be 

payable to a target company’s executive 

officers and directors in connection 

with the transaction. In addition, under 

our existing rules, companies are 

required to include in annual reports 

and annual meeting proxy statements 

detailed information in accordance with 

Item 402(j) of Regulation S–K about 

payments that may be made to named 

executive officers upon termination of 

employment or in connection with a 

change in control.82 The Item 402(j) 

disclosure is provided based on yearend information and various 

assumptions, and generally does not 


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83See Instruction 1 to Item 402(j), which requires 

quantitative disclosure applying the assumptions 

that the triggering event took place on the last 

business day of the issuer’s last completed fiscal 

year, and the price per share of the issuer’s 

securities is the closing market price as of that date. 

Where a triggering event has actually occurred for 

a named executive officer who was no longer 

serving as a named executive officer of the issuer 

at the end of the last completed fiscal year, 

Instruction 4 to Item 402(j) requires Item 402(j) 

disclosure for that named executive officer only for 

that triggering event. 

84See Section II.D.3 below. 

85See Sections II.D.2 and II.D.4 below. 

86As described below, however, because any 

agreements between a soliciting target company’s 

named executive officers and the acquiring 

company are beyond the scope of the disclosure 

required by Section 14A(b)(1), such agreements 

would not be subject to the Rule 14a–21(c) 

shareholder advisory vote required by Section 

14A(b)(2) and Rule 14a–21(c). See discussion of 

Rule 14a–21(c) in Section II.D.4 below. 

87Exchange Act Section 14A(b)(1). 

88Proposed Instruction 1 to Item 402(t) would 

provide that disclosure would be required for 

individuals covered by Items 402(a)(3)(i), (ii), and 

(iii), and for smaller reporting companies, the 

individuals covered by Items 402(m)(2)(i) and (ii). 

Accordingly, issuers would not have to provide 

Item 402(t) information with respect to individuals 

who would have been among the most highly 

compensated executive officers but for the fact that 

they were not serving as an executive officer at the 

end of the last completed fiscal year, for whom Item 

402 information otherwise is required by Item 

402(a)(3)(iv), and for smaller reporting companies 

by Item 402(l)(2)(iii). 

89Proposed Item 402(t)(2) of Regulation S–K. 

90As defined in Item 402(a)(6)(iii) of Regulation 

S–K. 

reflect any actual termination or 

termination event.83

While the Commission’s existing rules 

require disclosure about golden 

parachute arrangements as described 

above, they do not include detailed 

requirements for such disclosures that 

are applicable to proxy or consent 

solicitations to approve the transaction, 

as required by Section 14A(b)(1) of the 

Exchange Act. Consequently, in order to 

implement the disclosure requirements 

of Section 14A(b)(1), we are proposing 

to amend Schedule 14A to require 

disclosure with respect to golden 

parachute compensation arrangements 

in proxy or consent solicitations in 

connection with an acquisition, merger, 

consolidation, or proposed sale or other 

disposition of all or substantially all 

assets, in accordance with new 

proposed Item 402(t) of Regulation S–K. 

As described below, although not 

required by Section 14A(b)(1), we are 

also proposing to amend the disclosure 

requirements of other, similar forms, so 

that comparable golden parachutes 

disclosure would be required in other, 

similar transactions.84 We are not 

proposing to amend the requirements 

for golden parachutes disclosure in 

annual meeting proxy statements, 

although, as described below, under our 

proposal companies would be permitted 

to provide disclosure in annual meeting 

proxies in accordance with the new 

requirement.85

Section 14A(b)(1) requires disclosure 

of agreements or understandings 

between the person conducting the 

solicitation and any named executive 

officers of the issuer or any named 

executive officers of the acquiring issuer 

if the person conducting the solicitation 

is not the acquiring issuer. In the typical 

case, the soliciting person is the target 

company in a merger transaction since 

target company shareholder approval is 

ordinarily required to approve a merger 

under state law. Consistent with Section 

14A(b)(1) of the Exchange Act, 

agreements or understandings between a 

target issuer conducting a solicitation 

and its named executive officers would 

be subject to disclosure under proposed 

Item 402(t). In addition, because golden 

parachute compensation arrangements 

also may involve agreements or 

understandings between the acquiring 

company and the named executive 

officers of the target company, we have 

formulated proposed Item 402(t) to 

require disclosure of this compensation 

in addition to the disclosure mandated 

by Section 14A(b)(1). As proposed, Item 

402(t) would require disclosure of all 

golden parachute compensation relating 

to the merger among the target and 

acquiring companies and the named 

executive officers of each in order to 

cover the full scope of golden parachute 

compensation applicable to the 

transaction.86

2. Proposed Item 402(t) of Regulation 

S–K 

As noted above, Section 14A(b)(1) of 

the Exchange Act requires disclosure of 

the golden parachute compensation in 

any proxy or consent solicitation to 

approve an acquisition, merger, 

consolidation or proposed sale or 

disposition of all or substantially all 

assets to be ‘‘in a clear and simple form 

in accordance with regulations to be 

promulgated by the Commission’’ and to 

include ‘‘the aggregate total of all such 

compensation that may (and the 

conditions upon which it may) be paid 

or become payable to or on behalf of 

such executive officer.’’ 87 To satisfy 

these requirements for proxy or consent 

solicitations for these transactions, 

proposed Item 402(t) of Regulation S–K 

would require disclosure of named 

executive officers’ golden parachute 

arrangements in both tabular and 

narrative formats.88 We are proposing 

the following new table: 

GOLDEN PARACHUTE COMPENSATION

Name Cash 

($) Equity 

($) 

Pension/ 

NQDC 

($) 

Perquisites/ 

benefits 

($) 

Tax 

reimbursement 

($) 

Other 

($) 

Total 

($) 

(a) (b) (c) (d) (e) (f) (g) (h) 

PEO.

PFO.

A.

B.

C.

The table would present quantitative 

disclosure of the individual elements of 

compensation that an executive would 

receive that are based on or otherwise 

relate to the merger, acquisition, or 

similar transaction, and the total for 

each named executive officer.89

Elements that would be separately 

quantified and included in the total 

would be any cash severance payment 

(e.g., base salary, bonus, and pro-rata 

non-equity incentive plan 90


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66600 Federal Register / Vol. 75, No. 208 / Thursday, October 28, 2010 / Proposed Rules 

91Exchange Act Section 14A(b)(1) requires 

disclosure of ‘‘the aggregate total of all such 

compensation that may (and the conditions upon 

which it may) be paid or become payable to or on 

behalf of such executive officer.’’ 

92A ‘‘double-trigger’’ arrangement requires that 

the executive’s employment be terminated without 

cause or that the executive resign for good reason 

within a limited period of time after the change-incontrol to trigger payment. A ‘‘single-trigger’’ 

arrangement does not require such a termination or 

resignation after the change-in-control to trigger 

payment. 

93The circumstances covered by Item 402(j) 

include, without limitation, resignation, severance, 

retirement, a constructive termination of a named 

executive officer, a change in control of the 

registrant, or a change in a named executive 

officer’s responsibilities. 

94 Instruction 5 to Item 402(j). 95See Instruction 2 to Item 402(j), which permits 

exclusion of perquisites and other personal benefits 

or property if the aggregate amount of such 

compensation will be less than $10,000. 96We are also proposing conforming changes to 

Item 402(a)(6)(ii) [17 CFR 229.402(a)(6)(ii)] and Item 

402(m)(5)(ii) [17 CFR 229.402(m)(5)(ii)] of 

Regulation S–K to clarify that information regarding 

group life, health, hospitalization, or medical 

reimbursement plans that do not discriminate in 

scope, terms or operation, in favor of executive 

officers or directors of the company and that are 

generally available to all salaried employees must 

be included in disclosure pursuant to proposed 

Item 402(t). 

97 Item 402(j) of Regulation S–K. 

98Proposed Instruction 1 to Item 402(t)(2). 

99A company may choose to include the 

disclosure in the annual meeting proxy statement 

in order for the Section 14A(a)(1) shareholder vote 

to satisfy the exception from the merger proxy 

separate shareholder vote. See Section II.D.4 below. 

100Proposed Instruction 2 to Item 402(t)(2). 

101See Instruction 1 to Item 402(j). 

102We have proposed an Instruction 3 to Item 

402(t)(2) to provide, like Instruction 1 to Item 402(j), 

that in the event uncertainties exist as to the 

provision of payments and benefits, or the amounts 

involved, the issuer is required to make a 

reasonable estimate applicable to the payment or 

benefit and disclose material assumptions 

underlying such estimate in its disclosure. Unlike 

Item 402(j), as proposed Item 402(t) would not 

permit the disclosure of an estimated range of 

payments. 

compensation payments) (column (b)); 

the dollar value of accelerated stock 

awards, in-the-money option awards for 

which vesting would be accelerated, 

and payments in cancellation of stock 

and option awards (column (c)); pension 

and nonqualified deferred 

compensation benefit enhancements 

(column (d)); perquisites and other 

personal benefits and health and welfare 

benefits (column (e)); and tax 

reimbursements (e.g., Internal Revenue 

Code Section 280G tax gross-ups) 

(column (f)). We have proposed an 

‘‘Other’’ column of the table for any 

additional elements of compensation 

not specifically includable in the other 

columns of the table (column (g)). This 

column, like the columns for the other 

elements, would require footnote 

identification of each separate form of 

compensation reported. The final 

column in the table would require 

disclosure, for each named executive 

officer, of the aggregate total of all such 

compensation (column (h)).91 As 

proposed, the table would require 

separate footnote identification of 

amounts attributable to ‘‘single-trigger’’ 

arrangements and amounts attributable 

to ‘‘double-trigger’’ arrangements, so that 

shareholders can readily discern these 

amounts.92

As noted above, issuers are currently 

required to provide disclosure in annual 

reports on Form 10–K and in annual 

meeting proxy statements of potential 

payments upon termination or changein-control for their named executive 

officers under Item 402(j) of Regulation 

S–K. That item, which does not 

typically apply to merger proxies, 

requires disclosure regarding each 

contract, agreement, plan or 

arrangement, whether written or 

unwritten, that provides for payments to 

a named executive officer at, following, 

or in connection with termination or 

change in control of the issuer.93 We 

considered whether making the 

disclosure requirements in Item 402(j) 

applicable to transactions enumerated 

in Section 14A(b)(1), rather than 

adopting a new disclosure item for 

purposes of Section 14A(b)(1), would be 

an appropriate approach to satisfy the 

requirements of the Act. It appears, 

however, that certain elements required 

by Section 14A(b)(1) are not included in 

Item 402(j). Specifically, we believe that 

the requirement in Section 14A(b)(1) to 

present the information in a clear and 

simple form is most appropriately 

satisfied through the use of tabular 

disclosure, and Item 402(j) does not 

require disclosure in tabular format. In 

addition, Item 402(j) does not require 

disclosure about arrangements that do 

not discriminate in scope, terms or 

operation in favor of executive officers 

and that are available generally to all 

salaried employees,94 permits exclusion 

of de minimis perquisites and other 

personal benefits,95 and does not require 

presentation of an aggregate total of all 

compensation that is based on or 

otherwise relates to a transaction.96

We also considered whether it would 

be appropriate to amend Item 402(j) to 

include the elements required by 

Section 14A(b)(1), rather than adopting 

a new disclosure item. Section 14A(b)(1) 

addresses only compensation that is 

‘‘based on or otherwise relates to an 

acquisition, merger, consolidation, sale, 

or other disposition of all or 

substantially all of the assets of the 

issuer.’’ In comparison, Item 402(j) 

requires disclosure of potential 

payments in connection with ‘‘any 

termination, including without 

limitation resignation, severance, 

retirement or a constructive termination 

of a named executive officer, or a 

change in control of the registrant or a 

change in the named executive officer’s 

responsibilities.’’ 97 Although we could 

amend Item 402(j) to mandate 

disclosure of all the elements required 

by Section 14A(b)(1) for every 

termination scenario covered by the 

item, we believe such an approach 

would impose significant new burdens 

on issuers. Alternatively, although we 

could amend Item 402(j) to include the 

disclosure elements required by Section 

14A(b)(1) only with respect to change in 

control of the issuer, we believe that 

such an approach could result in a 

disclosure presentation that would be 

confusing to investors. Consequently, 

we are proposing the new item 

requirements described above. 

In a proxy statement soliciting 

shareholder approval of a merger or 

similar transaction, Item 402(t)’s tabular 

quantification of dollar amounts based 

on issuer stock price would be required 

to be based on the closing price per 

share as of the latest practicable date.98

Where Item 402(t) disclosure is 

included in an annual meeting proxy 

statement,99 such amounts would be 

calculated based on the closing market 

price per share of the issuer’s securities 

on the last business day of the issuer’s 

last completed fiscal year,100 consistent 

with quantification standards used in 

Item 402(j).101

The tabular disclosure required by 

Item 402(t) would require quantification 

with respect to any agreements or 

understandings, whether written or 

unwritten, between each named 

executive officer and the acquiring 

company or the target company, 

concerning any type of compensation, 

whether present, deferred or contingent, 

that is based on or otherwise relates to 

an acquisition, merger, consolidation, 

sale or other disposition of all or 

substantially all assets. As described 

above, the proposed table would 

quantify cash severance, equity awards 

that are accelerated or cashed out, 

pension and nonqualified deferred 

compensation enhancements, 

perquisites, and tax reimbursements. In 

addition, the proposed table would 

require disclosure and quantification of 

the value of any other compensation 

related to the transaction.102

However, Item 402(t) would require 

tabular and narrative disclosure only of 

compensation that is based on or 

otherwise relates to the transaction. As 

proposed, Item 402(t), like Item 


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103See Instruction 3 to Item 402(j). 

104 Information regarding such future 

employment agreements is subject to disclosure 

pursuant to Item 5(a) of Schedule 14A to the extent 

that such agreements constitute a ‘‘substantial 

interest’’ in the matter to be acted upon, as well as 

Item 5(b)(xii). 

105Proposed Item 402(t)(3) of Regulation S–K. 

106Proposed Item 402(t)(3)(iii) of Regulation S–K. 

107Proposed Item 402(t)(3)(i) of Regulation S–K. 

108Proposed Item 402(t)(3)(ii) of Regulation S–K. 

109Proposed Item 402(t)(3) of Regulation S–K. 

Such material factors would include, for example, 

provisions regarding modifications of outstanding 

options to extend the vesting period or the posttermination exercise period, or to lower the exercise 

price. 

110 Item 402(j) of Regulation S–K. 

111This exception is discussed in Section II.D.4 

below. 

112We note also that one example of material 

information to be addressed in CD&A is the basis 

for selecting particular termination or change-incontrol events as triggering payment (e.g., the 

rationale for providing a single trigger for payment 

in the event of a change-in-control). See Item 

402(b)(2)(xi) of Regulation S–K. 

402(j),103 would not require separate 

disclosure or quantification with respect 

to compensation disclosed in the 

Pension Benefits Table and 

Nonqualified Deferred Compensation 

Table. Item 402(t) also would not 

require disclosure or quantification of 

previously vested equity awards. 

Because these amounts are vested 

without regard to the transaction, we do 

not view them as compensation ‘‘that is 

based on or otherwise relates to’’ the 

transaction. Similarly, the proposed 

table would not require disclosure and 

quantification of compensation from 

bona fide post-transaction employment 

agreements to be entered into in 

connection with the merger or 

acquisition transaction, as we do not 

view future employment arrangements 

as compensation ‘‘that is based on or 

otherwise relates to’’ the transaction.104

Pursuant to the proposed narrative 

disclosure requirements,105 to 

implement the statutory mandate to 

disclose the conditions upon which the 

compensation may be paid or become 

payable, Item 402(t) would require 

issuers to describe any material 

conditions or obligations applicable to 

the receipt of payment, including but 

not limited to non-compete, nonsolicitation, non-disparagement or 

confidentiality agreements, their 

duration, and provisions regarding 

waiver or breach.106 We have also 

proposed a requirement to provide a 

description of the specific 

circumstances that would trigger 

payment,107 whether the payments 

would or could be lump sum, or annual, 

and their duration, and by whom the 

payments would be provided,108 and 

any material factors regarding each 

agreement.109 These proposed narrative 

items are modeled on the narrative 

disclosure currently required with 

respect to termination and change-incontrol agreements.110 An issuer seeking 

to satisfy the exception from the 

separate merger proxy shareholder vote 

under Section 14A(b)(2) and Rule 14a– 

21(c) by including Item 402(t) disclosure 

in an annual meeting proxy statement 

soliciting the shareholder vote required 

by Section 14A(a)(1) and Rule 14a– 

21(a) 111 would be able to satisfy Item 

402(j) disclosure requirements with 

respect to a change-in-control of the 

issuer by providing the disclosure 

required by Item 402(t).112 The issuer 

would, however, still be obligated to 

include in an annual meeting proxy 

statement disclosure in accordance with 

Item 402(j) about payments that may be 

made to named executive officers upon 

termination of employment. 

Request for Comment 

(32) Should Item 402(t) disclosure be 

required only in the context of an 

extraordinary transaction, as proposed? 

Should we extend the Item 402(t) 

disclosure requirement to annual 

meeting proxy statements generally, or 

in annual meeting proxy statements in 

which the shareholder advisory vote 

required by Section 14A(a)(1) is 

solicited? Would this disclosure be 

useful in annual meeting proxy 

statements in the absence of an actual 

transaction, or are the existing 

compensation disclosure requirements 

applicable to annual meeting proxy 

statements sufficient? Should we amend 

Item 402(j) to cover the matters required 

by Section 14A(b)(1) that are not 

otherwise required by that Item, rather 

than adopt proposed Item 402(t)? 

(33) As proposed, Item 402(t) would 

require disclosure of all golden 

parachute compensation relating to the 

merger among the target and acquiring 

companies and the named executive 

officers of each in order to cover the full 

scope of golden parachute 

compensation applicable to the 

transaction. Would it be potentially 

confusing to require disclosure under 

Item 402(t) that relates to golden 

parachute compensation of a broader 

group of individuals than required by 

Section 14A(b)(1)? 

(34) Does proposed Item 402(t) tabular 

disclosure capture ‘‘any type of 

compensation (whether present, 

deferred, or contingent) that is based on 

or otherwise relates to’’ the transaction? 

Will proposed Item 402(t) elicit 

disclosure of all elements of golden 

parachute compensation that may be 

paid or become payable and the 

aggregate total thereof ‘‘in a clear and 

simple form’’? If not, what specific 

revisions are necessary to accomplish 

these objectives? 

(35) Should we also require tabular 

disclosure of previously vested equity 

and pension benefits and require the 

total amount to include those amounts? 

For example, should the value of vested 

pension and nonqualified deferred 

compensation be presented so that 

shareholders may easily compare that 

value to the value of any enhancements 

attributable to the change-in-control 

transaction? Similarly, should the value 

of previously vested restricted stock and 

the in-the-money value of previously 

vested options be presented so that 

shareholders can compare these 

amounts to the value of awards for 

which vesting would be accelerated? 

Would inclusion of these amounts in 

the total overstate the amount of 

compensation payable as a result of the 

transaction? 

(36) In the table, will the proposed 

footnote identification of amounts of 

single-trigger and double-trigger 

compensation elements effectively 

highlight amounts payable on each 

basis? If not, should these elements be 

highlighted by disclosing them in 

separate columns, or by some other 

means? Is this information useful to 

investors? 

(37) Are there any elements captured 

by the ‘‘Other’’ column that should be 

presented separately, or in a different 

manner? If so, please explain why and 

how. 

(38) Should employment agreements 

that named executive officers of the 

target issuer enter into with the 

acquiring issuer for services to be 

performed in the future be excluded 

from the table, as proposed? Are such 

agreements used to induce target 

executives to support the transaction? 

Should such employment agreements 

instead be required to be quantified and 

included in the table? If such 

agreements should be quantified, should 

they be quantified separately, such as in 

a separate table, or is there a better way 

to present such agreements? If 

quantification is appropriate, should we 

specify how employment agreements 

should be quantified, for example by 

requiring a reasonable estimate 

applicable to the payment or benefit and 

disclosure of material assumptions 

underlying such estimates, or a 

valuation based on projected first year 

annual compensation, or average annual 

basis, or a present value for this 

compensation? If so, please explain. 

(39) In proxy statements soliciting 

shareholder approval of a merger or 

similar transaction, we are proposing 


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66602 Federal Register / Vol. 75, No. 208 / Thursday, October 28, 2010 / Proposed Rules 

113See Item 402(b)(2)(xi) of Regulation S–K. 

114 Item 402(a)(3)(iv) provides that up to two such 

individuals are named executive officers for 

purposes of this item’s general disclosure 

requirements. 

115Such persons are named executive officers as 

defined in Item 402(a)(3)(i)–(iii). 

116See proposed Item 3 of Schedule 14C. 

117For example, acquiring companies may solicit 

proxies to approve the issuance of shares or a 

reverse stock split in order to conduct a merger 

transaction; such proxy statements would be 

required to include disclosure of information 

required under Item 14 of Schedule 14A pursuant 

to Note A of Schedule 14A. See proposed Item 

5(a)(5) and Item 5(b)(3) of Schedule 14A. 

118 In addition to the proposed disclosure 

requirements on golden parachute arrangements in 

registration statements on Forms S–4 and F–4, 

companies will continue to be subject to the 

requirement to file such agreements and 

understandings as exhibits to these registration 

statements as required by Item 601(b)(10) of 

Regulation S–K [17 CFR 229.601(b)(10)]. 

119See proposed Item 15 of Schedule 13E–3. 

120See proposed Item 1011(b) of Regulation 

M–A. 

121See proposed Item 8 of Schedule 14D–9. 

122 ‘‘Bidder’’ is defined in Rule 14d–1(g)(2) [17 

CFR 240.14d–1(g)(2)]. 

that the tabular quantification of dollar 

amounts based on issuer stock price be 

based on the closing price per share as 

of the latest practicable date. Is this 

measurement date appropriate? Would a 

different measurement, such as the 

average closing price over the first five 

business days following the public 

announcement of the transaction, more 

accurately reflect the amounts payable 

to the named executive officers in 

connection with the transaction? If so, 

explain why. 

(40) The proposed narrative 

disclosure would explain by whom 

payments would be provided. Are any 

additional instructions needed to 

provide clarity with respect to the 

tabular disclosure in circumstances 

where separate payments would be 

made by the target issuer and the 

acquiring issuer? Should a separate 

table be required where golden 

parachute compensation is payable to 

named executive officers of the 

acquiring issuer, as well as named 

executive officers of the target issuer? 

(41) Will the proposed narrative 

disclosure adequately describe the 

conditions upon which the golden 

parachute compensation may be paid or 

become payable to or on behalf of each 

named executive officer? What, if any, 

additional disclosure is needed to 

accomplish this objective? What, if any, 

disclosure that we have proposed to 

require is not necessary to accomplish 

this objective? Explain why. 

(42) Are there other items of narrative 

disclosure that would be useful for 

investors? For example, should we 

require issuers to describe the basis for 

selecting each form of payment and to 

describe why it chose the various forms 

of compensation? 113

(43) As proposed, many of the table’s 

columns would report more than one 

element of golden parachute 

compensation, with footnote 

quantification of the individual 

elements. Would it facilitate investor 

understanding to present in separate 

columns any of those individual 

elements, such as the different 

components of cash severance? If so, 

explain which elements and why. 

Would additional columns make the 

table too complex? 

(44) As proposed, issuers would not 

have to provide Item 402(t) information 

with respect to individuals who would 

have been among the most highly 

compensated executive officers but for 

the fact that they were not serving as an 

executive officer at the end of the last 

completed fiscal year.114 Should Item 

402(t) information be required if such 

individuals remain employed by the 

issuer at the time of the proxy 

solicitation? If so, explain why. Also, as 

proposed, issuers would have to provide 

Item 402(t) information with respect to 

all individuals who served as the 

principal executive officer or principal 

financial officer of the issuer during the 

last completed fiscal year or who were 

among the issuer’s other most highly 

compensated executive officers at the 

end of that year,115 even if such persons 

are no longer employed by the issuer at 

the time of the proxy solicitation. 

Would Item 402(t) disclosure with 

respect to such an individual serve a 

useful purpose or should we exclude 

former employees from the disclosure 

requirement? 

3. Amendments to Schedule 14A, 

Schedule 14C, Schedule 14D–9, 

Schedule 13E–3, and Item 1011 of 

Regulation M–A 

We are proposing amendments to 

Items 5(a) and (b) of Schedule 14A 

under the Exchange Act, as well as 

conforming changes to Item 3 of 

Schedule 14C, Item 1011(b) of 

Regulation M–A, Item 15 of Schedule 

13E–3 and Item 8 of Schedule 14D–9. 

These amendments would be consistent 

with the goals of Section 14A(b)(1) by 

requiring that the disclosure set forth in 

Item 402(t) of Regulation S–K be 

included in any proxy or consent 

solicitation material seeking shareholder 

approval of an acquisition, merger, 

consolidation, or proposed sale or other 

distribution of all or substantially all the 

assets of the issuer. Our amendments 

would require such disclosure not only 

in a proxy or consent solicitation 

relating to such a transaction, as 

required by the Act, but also in the 

following: 

• Information statements filed 

pursuant to Regulation 14C; 116

• Proxy or consent solicitations that 

do not contain merger proposals but 

require disclosure of information under 

Item 14 of Schedule 14A pursuant to 

Note A of Schedule 14A; 117

• Registration statements on Forms 

S–4 and F–4 containing disclosure 

relating to mergers and similar 

transactions; 118

• Going private transactions on 

Schedule 13E–3; 119 and 

• Third-party tender offers on 

Schedule TO 120 and Schedule 14D– 

9 121 solicitation/recommendation 

statements. 

Issuers may structure transactions in 

a manner that avoids implicating 

Section 14(a) of the Exchange Act (e.g., 

tender offers and certain Rule 13e–3 

going-private transactions), while still 

effectively seeking the consent of 

shareholders with respect to their 

investment decision (e.g., whether or 

not to tender their shares or approve a 

going-private transaction, in instances 

where such going-private transactions 

are not subject to Regulation 14A). For 

these reasons, we believe requiring Item 

402(t) disclosure in all such transactions 

furthers the purposes of Section 14A(b) 

of the Exchange Act and would 

minimize the regulatory disparity that 

might otherwise result from treating 

such transactions differently. Thus, our 

proposed amendments would require 

the Item 402(t) disclosure in whatever 

form the transaction takes, whether a 

merger, acquisition, a Rule 13e–3 going 

private transaction or a tender offer. The 

vote required by Section 14A(b)(2), 

however, would not be extended to 

transactions beyond those specified in 

that section. 

We are also proposing to include 

language in Item 1011(b) of Regulation 

M–A that would require the bidder 122

in a third-party tender offer to provide 

information in its Schedule TO about a 

target’s golden parachute arrangements 

but only to the extent the bidder has 

made a reasonable inquiry about the 

golden parachute arrangements and has 

knowledge of such arrangements, since 

certain bidders in non-negotiated 

transactions may not have access to 

such information. In addition, we are 

proposing an exception to the disclosure 

requirement under Item 1011(b) for both 

bidders and targets in third-party tender 

offers and filing persons in Rule 13e–3 

going-private transactions where the 


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123 ‘‘Foreign private issuer’’ is defined in Rule 3b– 

4(c) [17 CFR 240.3b–4(c)]. 

124Proposed Instruction 2 to Item 402(t). 

125See, e.g., Item 402(a)(1) of Regulation S–K, and 

Items 6.B and 6.E.2 of Form 20–F [17 CFR 

249.220f]. 

126See Section II.D.2 above. 127See Section II.D.2 above. 

target or subject company is a foreign 

private issuer.123 We are also proposing 

an exception to the disclosure obligation 

under Item 402(t) with respect to 

agreements and understandings with 

senior management of foreign private 

issuers where the target or acquirer is a 

foreign private issuer.124 We believe 

such accommodations are appropriate 

in light of our long-standing 

accommodation to foreign private 

issuers regarding compensation 

disclosure.125

Request for Comment 

(45) Should we require Item 402(t) 

disclosure, as proposed, in transactions 

not specifically referenced in the Act? Is 

this disclosure necessary to minimize 

potential regulatory arbitrage? If not, 

please explain why not. 

(46) Are there any impediments to 

providing this disclosure in such 

transactions? If so, please explain. 

(47) Are the proposed exceptions from 

the Item 402(t) disclosure requirements 

for bidders and target companies in 

third-party tender offers and filing 

persons in Rule 13e–3 going-private 

transactions where the target or subject 

company is a foreign private issuer 

appropriate? Is the proposed exception 

from the Item 402(t) disclosure 

obligation with respect to agreements or 

understandings with senior 

management of foreign private issuers 

appropriate? If not, why not? Are any 

other exceptions for transactions 

involving foreign private issuers 

necessary? 

4. Proposed Rule 14a–21(c) 

Section 951 of the Act also amends 

the Exchange Act to add Section 

14A(b)(2), which generally requires a 

separate shareholder advisory vote on 

golden parachute compensation 

arrangements required to be disclosed 

under Section 14A(b)(1) in connection 

with mergers and similar transactions. A 

separate shareholder advisory vote 

would not be required on golden 

parachute compensation if disclosure of 

that compensation had been included in 

the executive compensation disclosure 

that was subject to a prior advisory vote 

of shareholders under Section 14A(a)(1) 

of the Exchange Act and Rule 14a–21(a). 

As discussed above,126 we are 

proposing new Item 402(t) of Regulation 

S–K to implement the compensation 

disclosure requirements set forth in new 

Section 14A(b)(1) of the Exchange Act 

by requiring disclosure of the full scope 

of golden parachute compensation 

applicable to the transaction. Consistent 

with Section 951 of the Act, whether or 

not Section 14A(b)(2) also requires the 

issuer to solicit shareholder approval of 

golden parachute compensation 

arrangements, disclosure prescribed by 

proposed Item 402(t) would be required 

in any proxy or consent solicitation for 

a meeting at which shareholders are 

asked to approve an acquisition, merger, 

consolidation or sale of the issuer’s 

assets. 

Under proposed Rule 14a–21(c), 

issuers would be required to provide a 

separate shareholder advisory vote in 

proxy statements for meetings at which 

shareholders are asked to approve an 

acquisition, merger, consolidation, or 

proposed sale or other disposition of all 

or substantially all assets, consistent 

with Section 14A(b)(2). This advisory 

vote would be required only with 

respect to the golden parachute 

agreements or understandings required 

to be disclosed by Section 14A(b)(1), as 

disclosed pursuant to proposed Item 

402(t) of Regulation S–K. Section 

14A(b)(1) requires disclosure of any 

agreements or understandings between 

the soliciting person and any named 

executive officer of the issuer or any 

named executive officers of the 

acquiring issuer, if the soliciting person 

is not the acquiring issuer. When a 

target issuer conducts a proxy or 

consent solicitation to approve a merger 

or similar transaction, golden parachute 

compensation agreements or 

understandings between the acquiring 

issuer and the named executive officers 

of the target issuer are not within the 

scope of disclosure required by Section 

14A(b)(1), and thus a shareholder vote 

to approve arrangements between the 

soliciting target issuer’s named 

executive officers and the acquiring 

issuer is not required by Exchange Act 

Section 14A(b)(2). Consequently, we 

have proposed Rule 14a–21(c) to require 

a shareholder advisory vote only on the 

golden parachute compensation 

agreements or understandings for which 

Section 14A(b)(1) requires disclosure 

and Section 14A(b)(2) requires a 

shareholder vote. 

As described above,127 however, 

because compensation arrangements 

may involve agreements or 

understandings between the acquiring 

issuer and the named executive officers 

of the target issuer, proposed Item 402(t) 

of Regulation S–K would require 

disclosure of compensation pursuant to 

these arrangements, as well as the 

arrangements for which Section 

14A(b)(1) requires disclosure, in order 

to require disclosure of the full scope of 

golden parachute compensation 

applicable to the transaction. In this 

regard, Item 402(t) of Regulation S–K 

would require disclosure of a broader 

group of agreements and understandings 

than required by Exchange Act Section 

14A(b)(1), but proposed Rule 14a–21(c) 

would require a separate shareholder 

advisory vote only on the agreements 

and understandings described in 

Exchange Act Section 14A(b)(1). Even 

though agreements and understandings 

between the acquiring issuer and the 

named executive officers of the target 

issuer would not be subject to the Rule 

14a–21(c) vote unless the acquiring 

issuer is soliciting proxies to approve 

the merger, we are proposing to require 

this disclosure because we believe that 

shareholders may find disclosure about 

these arrangements informative to their 

voting decisions regarding not only the 

Rule 14a–21(c) advisory vote, but also 

the transaction itself. Moreover, some 

issuers may choose to subject these 

arrangements to the shareholder 

advisory vote voluntarily because of 

investor interest in the full scope of 

golden parachute compensation 

applicable to the transaction or for other 

reasons. 

Our proposed rule would not require 

issuers to use any specific language or 

form of resolution to be voted on by 

shareholders. This shareholder vote 

would not be binding on the issuer or 

its board of directors. In addition, 

consistent with Section 14A(b)(2), 

issuers would not be required to include 

in the merger proxy a separate 

shareholder vote on the golden 

parachute compensation disclosed 

under Item 402(t) of Regulation S–K if 

Item 402(t) disclosure of that 

compensation had been included in the 

executive compensation disclosure that 

was subject to a prior vote of 

shareholders under Section 14A(a)(1) of 

the Exchange Act and Rule 14a–21(a). In 

this regard, we note that Section 

14A(b)(2) requires only that the golden 

parachute arrangements have been 

subject to a prior shareholder vote under 

Section 14A(a)(1); such arrangements 

need not have been approved by 

shareholders. 

For issuers to take advantage of this 

exception, however, the executive 

compensation disclosure subject to the 

prior shareholder vote would need to 

have included Item 402(t) disclosure of 

the same golden parachute 

arrangements. Even if the annual 

meeting proxy statement provides some 

disclosure with respect to golden 


jlentini on DSKJ8SOYB1PROD with PROPOSALS3
66604 Federal Register / Vol. 75, No. 208 / Thursday, October 28, 2010 / Proposed Rules 

128See CD&A and Item 402(j) of Regulation S–K, 

and for smaller reporting companies see Item 

402(q)(2) of Regulation S–K for the disclosure 

requirements applicable to annual meeting proxy 

statements. 

129As proposed, if the disclosure pursuant to 

Item 402(t) has been updated to change only the 

value of the items in the Golden Parachute 

Compensation Table to reflect price movements in 

the issuer’s securities, no new shareholder advisory 

vote under Section 14A(b)(1) would be required. 

However, if any terms of such agreements have 

changed subsequent to the prior Section 14A(a)(1) 

shareholder vote, a separate vote under Section 

14A(b)(2) and Rule 14a–21(c) would be required. 

For example, we would view any change that 

would result in an IRC Section 280G tax gross-up 

becoming payable as a change in terms triggering 

such a separate vote. 

130See proposed Instruction 6 to Item 402(t)(2) of 

Regulation S–K. 

131Proposed Instruction 7 to Item 402(t)(2). As 

discussed above, such agreements are not required 

to be subject to the proposed Rule 14a–21(c) 

shareholder advisory vote, but issuers may 

voluntarily subject them to such a vote. 

parachute arrangements,128 the annual 

meeting proxy statement would need to 

include the disclosure required by Item 

402(t) in order for the annual meeting 

shareholder vote under Section 

14A(a)(1) and Rule 14a–21(a) to satisfy 

the exception from the merger proxy 

separate shareholder vote under Section 

14A(b)(2) and Rule 14a–21(c). 

Consequently, we would expect that 

some issuers may voluntarily include 

Item 402(t) disclosure with their other 

executive compensation disclosure in 

annual meeting proxy statements 

soliciting the shareholder vote required 

by Section 14A(a)(1) and Rule 14–21(a) 

so that this exception would be 

available to the issuer for a potential 

subsequent merger or acquisition 

transaction. We also expect that some 

issuers may choose to include the new 

disclosure for other reasons, such as 

investor interest in the information. 

The exception would be available 

only to the extent the same golden 

parachute arrangements previously 

subject to an annual meeting 

shareholder vote remain in effect, and 

the terms of those arrangements have 

not been modified subsequent to the 

Section 14A(a)(1) shareholder vote. New 

golden parachute arrangements, and any 

revisions to golden parachute 

arrangements that were subject to a 

prior Section 14A(a)(1) shareholder vote 

would be subject to the separate merger 

proxy shareholder vote requirement of 

Section 14A(b)(2) and Rule 14a– 

21(c).129 Because a shareholder vote 

would already have been obtained on 

portions of the arrangements, however, 

we are proposing that only the new 

arrangements and revised terms of the 

arrangements previously subject to a 

Section 14A(a)(1) shareholder vote 

would be subject to the merger proxy 

separate shareholder vote under Section 

14A(b)(2) and Rule 14a–21(c). 

Under our proposal, issuers providing 

for a shareholder vote on new 

arrangements or revised terms would 

provide two separate tables under Item 

402(t) of Regulation S–K in merger 

proxy statements.130 One table would 

disclose all golden parachute 

compensation, including both 

arrangements and amounts previously 

disclosed and subject to a say-on-pay 

vote under Section 14A(a)(1) and Rule 

14a–21(a) and the new arrangements or 

revised terms. The second table would 

disclose only the new arrangements or 

revised terms subject to the vote, so that 

shareholders can clearly see what is 

subject to the shareholder vote under 

Section 14A(b)(2) and Rule 14a–21(c). 

Similarly, in cases where Item 402(t) 

requires disclosure of arrangements 

between an acquiring company and the 

named executive officers of the 

soliciting target company, issuers 

should clarify whether these agreements 

are included in the shareholder advisory 

vote by providing a separate table of all 

agreements and understandings subject 

to the shareholder advisory vote 

required by Section 14A(b)(2) and Rule 

14a–21(c), if different from the full 

scope of golden parachute 

compensation subject to Item 402(t) 

disclosure.131

Request for Comment 

(48) If golden parachute arrangements 

have been modified or amended 

subsequent to being subject to the 

annual shareholder vote under Rule 

14a–21(a), should we require the merger 

proxy separate shareholder vote to cover 

the entire set of golden parachute 

arrangements or should we, as 

proposed, require a separate vote only 

as to the changes to such arrangements? 

For example, if a new arrangement is 

added, would the Section 14A(b)(2) 

shareholder advisory vote be 

meaningful if shareholders do not have 

the opportunity to express their 

approval or disapproval of the full 

complement of compensation that 

would be payable? 

(49) Should we exempt certain 

changes to golden parachute 

arrangements that have been altered or 

amended subsequent to their being 

subject to the annual shareholder vote 

under Rule 14a–21(a)? For example, 

should we require a separate vote under 

Rule 14a–21(c) if the only change is the 

addition of a new named executive 

officer not included in the prior 

disclosure or a change in terms that 

would reduce the amounts payable? 

Should we provide an exemption for 

golden parachute arrangements 

previously subject to an annual 

shareholder vote if the only change is 

the subsequent grant, in the ordinary 

course, of additional awards under an 

employee benefit plan, such as stock 

options or restricted stock, that are 

subject to the same acceleration terms 

that applied to those already covered by 

the previous vote? For example, if 

subsequent to the previous vote, 

additional equity awards are granted in 

the ordinary course pursuant to a plan, 

such as an annual option grant, and 

those awards are subject to acceleration 

in the event of a change in control on 

the same terms as earlier awards that 

were subject to the previous vote, 

should we exempt those subsequent 

awards? Should any other types of 

changes to golden parachute 

compensation arrangements be so 

exempted? 

(50) Where an issuer voluntarily 

includes Item 402(t) disclosure in an 

annual meeting proxy statement to 

satisfy the exception from the Section 

14A(b)(2) shareholder vote, should all 

Item 402(t) disclosure be required to be 

presented in one section of the 

document, without cross references, to 

facilitate shareholder understanding? If 

not, why not? Does proposed Instruction 

6 to Item 402(t)(2) assure certainty and 

predictability regarding the availability 

of this exception? If not, what additional 

instructions are needed? 

(51) Section 14A(b)(2) does not 

specify which shares are entitled to vote 

in the shareholder vote to approve the 

agreements or understandings and 

compensation specified in Section 

14A(b)(1), nor does this section direct 

the Commission to adopt rules 

addressing this point. We are not 

proposing to address this question in 

our rules, but should our rules 

implementing Section 14A(b)(2) address 

this question? If so, how, and on what 

basis? 

E. Treatment of Smaller Companies 

Section 951 of the Act establishes a 

new Section 14A(e) of the Exchange 

Act, which provides that we may, by 

rule or order, exempt an issuer or class 

of issuers from the requirements of 

Sections 14A(a) and (b). In determining 

whether to make an exemption under 

this subsection, we are directed to take 

into account, among other 

considerations, whether the 

requirements of Sections 14A(a) and 

14A(b) disproportionately burden small 

issuers. 

Our proposed rules would not exempt 

small issuers from the requirements of 

Sections 14A(a) and 14A(b). We believe 

the shareholder advisory votes and 


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132 ‘‘Smaller reporting company’’ is defined in 

Rule 12b–2 under the Exchange Act. 

133See Executive Compensation and Related 

Person Disclosure, Release No. 33–8732A (Aug. 29, 

2006) [71 FR 53158] (hereinafter, the ‘‘2006 

Executive Compensation Release’’) at Section II.D.1. 

The scaled compensation disclosure requirements 

for smaller reporting companies are set forth in Item 

402(1) [17 CFR 229.402(l)] through (r) [17 CFR 

229.402(r)] of Regulation S–K. 

134 In adopting executive compensation 

disclosure requirements applicable to smaller 

reporting companies, we have recognized that the 

executive compensation arrangements of these 

issuers typically are less complex than those of 

other public companies. See 2006 Executive 

Compensation Release, supra note 133, at Section 

II.D.1. 135Exchange Act Section 14A(a)(2). 

additional disclosure required by 

Section 14A and our proposed rules 

would be significant for investors in all 

issuers, including smaller reporting 

companies.132 As a result, the proposed 

rules discussed above will all apply to 

smaller reporting companies, with the 

exception of our proposed amendment 

to Item 402(b) of Regulation S–K, as 

smaller reporting companies are not 

required to provide a CD&A. We do not 

believe that smaller reporting 

companies should be exempt from the 

say-on-pay vote, frequency of say-onpay votes and golden parachute 

disclosure and vote because we believe 

investors have the same interest in 

voting on the compensation of smaller 

reporting companies and in clear and 

simple disclosure of golden parachute 

compensation in connection with 

mergers and similar transactions as they 

have for other issuers. 

We have crafted our proposals to 

minimize the costs for smaller reporting 

companies, while providing 

shareholders the opportunity to express 

their views on the companies’ 

compensation arrangements. For 

example, our proposed amendments 

would provide the shareholders of 

smaller reporting companies with the 

same voting rights with respect to 

executive compensation as shareholders 

of other companies subject to the proxy 

rules. We are not currently aware that 

Section 14A and our proposed rules 

would unduly burden smaller reporting 

companies. Our proposed amendments, 

for example, would not alter the existing 

scaled disclosure requirements set forth 

in Item 402 of Regulation S–K for 

smaller reporting companies, which 

recognize that the compensation 

arrangements of smaller reporting 

companies typically are less complex 

than those of other public companies.133

Under our proposed rules, we would 

not alter the provision in our rules that 

smaller reporting companies are not 

required to provide a CD&A. 

Our proposed rules would, however, 

require quantification of golden 

parachute arrangements in merger 

proxies. Smaller reporting companies 

are not required to provide this 

quantification under current Item 402(q) 

in annual meeting proxy statements, 

and would not be required to do so 

under our proposals unless they seek to 

qualify for the exception for a 

shareholder advisory vote on golden 

parachute compensation in a later 

merger transaction. Even though our 

proposed rules would impose additional 

disclosure requirements relating to the 

shareholder advisory votes required by 

Section 14A, we preliminarily do not 

believe our proposed rules would 

impose a significant additional cost or 

disproportionate burden upon smaller 

reporting companies. As noted above, 

smaller reporting companies tend to 

have less complex compensation 

arrangements 134 so the proposed 

additional disclosures should not add 

significantly to their disclosure burden. 

As a result, we do not believe our 

proposed rules would place a 

disproportionate burden on smaller 

reporting companies. 

Request for Comment 

(52) Should we fully, partially, or 

conditionally exempt smaller reporting 

companies or some other category of 

smaller companies from some or all of 

the requirements of Section 14A? Are 

the provisions of Section 14A unduly 

burdensome on small companies and if 

so, how are they unduly burdensome? 

(53) Should we fully, partially, or 

conditionally exempt smaller reporting 

companies or some other category of 

smaller companies from any or all of our 

proposed rules? If so, which ones? Are 

any of our proposed rules unduly 

burdensome to smaller reporting 

companies and if so, how are they 

unduly burdensome? 

(54) Are the golden parachute 

arrangements of smaller reporting 

companies relatively simple and 

straightforward compared to those of 

larger issuers? Would the disclosure of 

such arrangements required by 

proposed Item 402(t) impose an undue 

burden on smaller reporting companies? 

(55) Should we clarify in an 

instruction to Rule 14a–21, as proposed, 

that smaller reporting companies are not 

required to include a CD&A in their 

proxy statements in order to comply 

with our proposed amendments? 

(56) Are there any other steps that we 

should take to reduce the burden on 

smaller reporting companies? 

F. Transition Matters 

As noted above in Section I, Section 

14A(a)(3) requires that both the initial 

shareholder vote on executive 

compensation and the initial vote on the 

frequency of votes on executive 

compensation be included in proxy 

statements relating to an issuer’s first 

annual or other meeting of the 

shareholders occurring on or after 

January 21, 2011. Because Section 

14A(a) applies to shareholder meetings 

taking place on or after January 21, 

2011, any proxy statements, whether in 

preliminary or definitive form, even if 

filed prior to this date, for meetings 

taking place on or after January 21, 

2011, must include the separate 

resolutions for shareholders to approve 

executive compensation and the 

frequency of say-on-pay votes required 

by Section 14A(a) without regard to 

whether the Commission has adopted 

rules to implement Section 14A(a) by 

that time. Therefore, in order to 

facilitate compliance with the new 

statute, we are addressing certain first 

year transition issues. 

Rule 14a–6 currently requires the 

filing of a preliminary proxy statement 

at least ten days before the proxy is sent 

or mailed to shareholders unless the 

meeting relates only to the matters 

specified by Rule 14a–6(a). Until we 

take final action to implement Exchange 

Act Section 14A, we will not object if 

issuers do not file proxy material in 

preliminary form if the only matters that 

would require a filing in preliminary 

form are the say-on-pay vote and 

frequency of say-on-pay vote required 

by Section 14A(a). 

Rule 14a–4 under the Exchange Act 

currently provides that persons solicited 

are to be afforded the choice between 

approval or disapproval of, or 

abstention with respect to, each matter 

to be voted on, other than elections of 

directors. Exchange Act Section 

14A(a)(2) requires a ‘‘separate resolution 

subject to shareholder vote to determine 

whether [the say-on-pay] votes * * * 

will occur every 1, 2, or 3 years.’’ 135

Until we take final action to implement 

Exchange Act Section 14A, we will not 

object if the form of proxy for a 

shareholder vote on the frequency of 

say-on-pay votes provides means 

whereby the person solicited is afforded 

an opportunity to specify by boxes a 

choice among 1, 2 or 3 years, or abstain. 

In addition, we understand that some 

proxy service providers may have 

difficulty in the short term in 

programming their systems to enable 

shareholders to vote among four choices 

and that their systems are currently set 

up to register at most three votes—for, 

against, abstain. If proxy service 

providers are not able to reprogram their 


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136See Shareholder Communications, 

Shareholder Participation in the Corporate 

Electoral Process and Corporate Governance 

Generally, Release No. 34–16356 (Nov. 21, 1979) 

[44 FR 68770]. 

137 44 U.S.C. 3501 et seq. 

138 44 U.S.C. 3507(d) and 5 CFR 1320.11. 

139The paperwork burden from Regulation S–K is 

imposed through the forms that are subject to the 

disclosures in Regulation S–K and is reflected in 

the analysis of those forms. To avoid a Paperwork 

Reduction Act inventory reflecting duplicative 

burdens, for administrative convenience we 

estimate the burdens imposed by Regulation S–K to 

be a total of one hour. 

systems to enable shareholders to vote 

among four choices in time for the 

shareholder votes required by Section 

14A(a)(2), until we take final action to 

implement Exchange Act Section 14A, 

we will not object if the form of proxy 

for a shareholder vote on the frequency 

of say-on-pay votes provides means 

whereby the person solicited is afforded 

an opportunity to specify by boxes a 

choice among 1, 2 or 3 years, and 

proxies are not voted on the frequency 

of say-on-pay votes matter in the event 

the person solicited does not select a 

choice among 1, 2 or 3 years.136

Finally, issuers with outstanding 

indebtedness under the TARP are 

already required to conduct an annual 

shareholder advisory vote on executive 

compensation until the issuer has 

repaid all outstanding indebtedness 

under the TARP. Because such issuers 

are subject to an annual requirement to 

provide a say-on-pay vote, a 

requirement to provide a vote on the 

frequency of such votes would impose 

unnecessary burdens on issuers and 

shareholders. Until we take final action 

to implement Exchange Act Section 

14A, we will not object if an issuer with 

outstanding indebtedness under the 

TARP does not include a resolution for 

a shareholder advisory vote on the 

frequency of say-on-pay votes in its 

proxy statement for its annual meeting, 

provided it fully complies with its sayon-pay voting obligations under EESA 

Section 111(e). 

G. General Request for Comment 

We request and encourage any 

interested person to submit comments 

on any aspect of our proposals, other 

matters that might have an impact on 

the amendments, and any suggestions 

for additional changes. With respect to 

any comments, we note that they are of 

greatest assistance to our rulemaking 

initiative if accompanied by supporting 

data and analysis of the issues 

addressed in those comments and by 

alternatives to our proposals where 

appropriate. 

III. Paperwork Reduction Act 

A. Background 

The proposed amendments contain 

‘‘collection of information’’ requirements 

within the meaning of the Paperwork 

Reduction Act of 1995 (‘‘PRA’’).137 We 

are submitting the proposed 

amendments to the Office of 

Management and Budget (‘‘OMB’’) for 

review in accordance with the PRA.138

The title for the collection of 

information is: 

(1) ‘‘Regulation 14A and Schedule 

14A’’ (OMB Control No. 3235–0059); 

(2) ‘‘Regulation 14C and Schedule 

14C’’ (OMB Control No. 3235–0057); 

(3) ‘‘Form 10–K’’ (OMB Control No. 

3235–0063); 

(4) ‘‘Form 10–Q’’ (OMB Control No. 

3235–0070); 

(5) ‘‘Form 10’’ (OMB Control No. 

3235–0064); 

(6) ‘‘Regulation S–K’’ (OMB Control 

No. 3235–0071); 139

(7) ‘‘Schedule 14D–9’’ (OMB Control 

No. 3235–0102); 

(8) ‘‘Schedule 13E–3’’ (OMB Control 

No. 3235–0007); 

(9) ‘‘Schedule TO’’ (OMB Control No. 

3235–0515); 

(10) ‘‘Form S–1’’ (OMB Control No. 

3235–0065); 

(11) ‘‘Form S–4’’ (OMB Control No. 

3235–0324); 

(12) ‘‘Form S–11’’ (OMB Control No. 

3235–0067); 

(13) ‘‘Form F–4’’ (OMB Control No. 

3235–0325); and 

(14) ‘‘Form N–2’’ (OMB Control No. 

3235–0026). 

The regulations, schedules, and forms 

were adopted under the Securities Act 

and the Exchange Act, except for Form 

N–2, which we adopted pursuant to the 

Securities Act and the Investment 

Company Act. The regulations, forms, 

and schedules set forth the disclosure 

requirements for periodic reports, 

registration statements and proxy and 

information statements filed by 

companies to help shareholders make 

informed voting decisions. The hours 

and costs associated with preparing, 

filing and sending the form or schedule 

constitute reporting and cost burdens 

imposed by each collection of 

information. An agency may not 

conduct or sponsor, and a person is not 

required to respond to, a collection of 

information unless it displays a 

currently valid OMB control number. 

As discussed in more detail above, we 

are proposing new Rule 14a–21 under 

the Exchange Act and new Item 24 of 

Schedule 14A. Proposed Rule 14a–21 

would implement the requirements of 

Section 14A of the Exchange Act to 

provide separate shareholder advisory 

votes on executive compensation, the 

frequency of shareholder votes on 

executive compensation, and, in 

connection with merger and similar 

transactions, golden parachute 

compensation arrangements. New Item 

24 of Schedule 14A would require 

disclosure in proxy statements with 

respect to each of these shareholder 

votes. New Rule 14a–21 and new Item 

24 of Schedule 14A would increase 

existing disclosure burdens for proxy 

statements by requiring: 

• New disclosure about the 

requirement to provide separate 

shareholder votes on executive 

compensation, the frequency of 

shareholder votes on executive 

compensation and golden parachute 

compensation arrangements in 

connection with merger transactions; 

and 

• New disclosure of the general effect 

of the shareholder advisory votes, such 

as whether such votes are non-binding. 

As discussed in more detail above, we 

are also proposing amendments to Item 

402(b) of Regulation S–K. The proposed 

amendments to Item 402(b) of 

Regulation S–K may increase existing 

disclosure burdens for proxy statements 

by requiring: 

• New disclosure of whether, and if 

so, how the issuer has considered the 

results of previous shareholder votes on 

executive compensation required by 

Section 14A of the Exchange Act in 

determining compensation policies and 

decisions, and if so, how that 

consideration has affected the issuer’s 

compensation decisions and policies. 

As discussed in more detail above, we 

are also proposing new Item 402(t) of 

Regulation S–K and the proposed 

amendments to Item 1011(b) of 

Regulation M–A, Item 5 of Schedule 

14A, Item 15 of Schedule 13E–3 and 

Item 8 of Schedule 14D–9. These 

proposed amendments would increase 

existing disclosure burdens for proxy 

statements, registration statements on 

Form S–4 and F–4, tender offer 

schedules and going private schedules 

by requiring: 

• New tabular and narrative 

disclosure of understandings and 

agreements of named executive officers 

with acquiring and target companies in 

connection with merger, acquisition, 

tender offer and Rule 13e–3 goingprivate transactions, and disclosure of 

the aggregate total of all compensation 

that may be paid or become payable to 

each named executive officer. 

As discussed in more detail above, we 

are proposing to amend Forms 10–K and 

10–Q. The proposed amendments to 

Form 10–K and Form 10–Q would 

increase existing disclosure burdens for 


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annual reports on Form 10–K and 

quarterly reports on Form 10–Q by 

requiring: 

• New disclosure of the issuer’s 

decision of how frequently to provide a 

separate shareholder vote on executive 

compensation in light of a shareholder 

advisory vote on the frequency of 

shareholder votes on executive 

compensation conducted pursuant to 

Section 14A(a)(2) of the Exchange Act. 

Together, new Rule 14a–21 and new 

Item 24 of Schedule 14A and the 

proposed amendments to Item 5 of 

Schedule 14A and the proposed 

amendments to Item 402 of Regulation 

S–K, Item 1011 of Regulation M–A, Item 

15 of Schedule 13E–3 and Item 8 of 

Schedule 14D–9 would implement and 

supplement the requirements under 

Section 14A of the Exchange Act and 

also would provide additional 

meaningful disclosure regarding golden 

parachute arrangements and regarding 

issuers’ consideration of the shareholder 

votes and the impact of such votes on 

issuers’ compensation policies and 

decisions. We believe these changes 

may result in more meaningful 

disclosure for investors making voting 

or investment decisions. 

We are proposing an amendment to 

Rule 14a–4, which relates to the form of 

proxy that issuers are required to 

include with their proxy materials, to 

require that issuers present four choices 

to their shareholders in connection with 

the advisory vote on frequency. We are 

also proposing an amendment to Rule 

14a–6 to add the shareholder votes on 

executive compensation and the 

frequency of shareholder votes on 

executive compensation required by 

Section 14A(a) to the list of items that 

do not trigger the filing of a preliminary 

proxy statement. In addition, we are 

proposing an amendment to Rule 14a– 

8, adding a note to Rule 14a–8(i)(10) to 

clarify the status of shareholder 

proposals relating to the approval of 

executive compensation or the 

frequency of shareholder votes 

approving executive compensation. 

Finally, we are proposing conforming 

amendments to Item 402(a) and Item 

402(m) of Regulation S–K, clarifying 

that the disclosure required by proposed 

Item 402(t) includes information 

regarding group life, health, 

hospitalization, or medical 

reimbursement plans that do not 

discriminate in scope, terms or 

operation, in favor of executive officers 

or directors of the registrant and that are 

available generally to all salaried 

employees. Pursuant to these 

conforming amendments, issuers may 

continue to omit such information in 

connection with disclosure required by 

other portions of Item 402 of Regulation 

S–K. The proposed amendments to Rule 

14a–4, Rule 14a–6, Rule 14a–8 under 

the Exchange Act and Item 402(a) and 

Item 402(m) of Regulation S–K would 

not increase any existing disclosure 

burden. We believe these proposals, if 

adopted, would merely clarify existing 

and new statutory requirements or 

reduce burdens otherwise arising from 

our proposals. As a result, these 

amendments would not affect any 

existing disclosure burden. 

Compliance with the proposed 

amendments by affected U.S. issuers 

would be mandatory. Responses to the 

information collections would not be 

kept confidential and there would be no 

mandatory retention period for the 

information disclosed. 

B. Burden and Cost Estimates Related to 

the Proposed Amendments 

We anticipate that the proposed 

disclosure amendments would increase 

the burdens and costs for companies 

that would be subject to the proposed 

amendments. New Section 14A of the 

Exchange Act, as created by Section 951 

of the Act, has already increased the 

burdens and costs for issuers by 

requiring separate shareholder votes on 

executive compensation and the 

frequency of shareholder votes on 

executive compensation. Section 14A 

also requires additional disclosure of 

golden parachute arrangements in proxy 

solicitations to approve merger 

transactions and a separate shareholder 

vote to approve such arrangements in 

certain circumstances. Our proposed 

amendments address the Act’s 

requirements in the context of 

disclosure under the federal proxy rules, 

Regulation S–K and related forms and 

schedules, thereby creating only an 

incremental increase in the burdens and 

costs for such issuers. The proposed 

amendments will specify how issuers 

are to comply with Section 14A of the 

Exchange Act and require new 

disclosure with respect to comparable 

transactions. 

For purposes of the PRA, we estimate 

the annual incremental paperwork 

burden for all companies to prepare the 

disclosure that would be required under 

our proposals to be approximately 

25,192 hours of company personnel 

time and a cost of approximately 

$8,141,200 for the services of outside 

professionals. These estimates include 

the time and the cost of data gathering 

systems and disclosure controls and 

procedures, the time and cost of 

preparing and reviewing disclosure by 

in-house and outside counsel and 

executive officers, and the time and cost 

of filing documents and retaining 

records. In deriving our estimates, we 

recognize that the burdens will likely 

vary among individual companies based 

on a number of factors, including the 

size and complexity of their 

organizations, and the nature of their 

operations. We believe that some 

companies will experience costs in 

excess of this average in the first year of 

compliance with proposals and some 

companies may experience less than the 

average costs. 

We derived the above estimates by 

estimating the average number of hours 

it would take an issuer to prepare and 

review the proposed disclosure 

requirements. These estimates represent 

the average burden for all companies, 

both large and small. Our estimates have 

been adjusted to reflect the fact that 

some of the proposed amendments 

would be required in some but not all 

of the above listed documents 

depending upon the circumstances, and 

would not apply to all companies. 

With respect to reporting companies, 

the disclosure required by new Item 

402(t) of Regulation S–K would be 

required in merger proxy and 

information statements, Forms S–4 and 

F–4, Schedule 13E–3 and certain tender 

offer documents and solicitation/ 

recommendation statements. As 

proposed, the disclosure required by 

new Item 402(t) may also be included in 

annual meeting proxy statements on a 

voluntary basis. 

The disclosure required by our 

amendments to Item 402(b) of 

Regulation S–K would be required in 

proxy and information statements as 

well as Forms 10, 10–K, S–1, S–4, S–11, 

and N–2. The proposed amendments to 

CD&A would not be applicable to 

smaller reporting companies because 

under current CD&A reporting 

requirements these companies are not 

required to provide CD&A in their 

Commission filings. Based on the 

number of proxy filings that were 

received in the 2009 fiscal year, we 

estimate that approximately 1,200 

domestic companies are smaller 

reporting companies that have a public 

float of less than $75 million. 

Our annual burden estimates are also 

based on other assumptions. First, we 

assumed that the burden hours of the 

proposed amendments would be 

comparable to the burden hours related 

to similar disclosure requirements 

under current reporting requirements, 

such as the disclosure required by Item 

402(j). Second, we assumed that 

substantially all of the burdens 

associated with the proposed 

amendments to Rule 14a–21 and Item 

24 would be associated with Schedule 

14A as this would be the primary 


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140Our estimate for annual proxy statements is 

based upon an estimated burden over a six-year 

period during which the shareholder advisory votes 

required by Section 14A(a) would not occur 

annually. We used a six-year period because issuers 

will conduct at least two shareholder advisory votes 

on executive compensation and at least one 

shareholder advisory vote on the frequency of such 

votes in this time period. We then estimated an 

average annual burden based on the average burden 

over the six-year period. 

141We have assumed that the annual incremental 

paperwork burden under the proposed amendments 

to Item 402(b) of Regulation S–K would be included 

in the annual meeting proxy statement so that the 

annual incremental paperwork burden for the Form 

10–K relates only to the proposed amendments to 

Item 9A. 

142Figures in both tables have been rounded to 

the nearest whole number. 

disclosure document in which these 

items would be prepared and presented. 

In the case of our proposed amendments 

to Item 402(b) and Item 402(t) of 

Regulation S–K, we have assumed the 

burdens associated with the proposed 

amendments would be associated with 

various disclosure documents as these 

items will be included in a number of 

forms and statements. For each 

reporting company, we estimate that the 

proposed amendments would impose 

on average the following incremental 

burden hours: 

• 2 hours for the proposed amendments 

to CD&A 

• 1 hour for the proposed amendments 

to Item 24 of Schedule 14A 

• 1 hour for the proposed amendments 

to Form 10–K 

• 1 hour for the proposed amendments 

to Form 10–Q 

• 20 hours for new Item 402(t) of 

Regulation S–K 

1. Annual Meeting Proxy Statements 

For purposes of the PRA, in the case 

of reporting companies, we estimate the 

annual incremental paperwork burden 

for proxy statements under the proposed 

amendments would be approximately 

1 hour per form for companies that are 

smaller reporting companies, and 

3 hours per form for companies that are 

non-accelerated filers (and not smaller 

reporting companies), accelerated filers, 

or large accelerated filers.140 The 

estimated burden is smaller for smaller 

reporting companies as such issuers are 

not required to include a CD&A. 

2. Exchange Act Periodic Reports 

For purposes of the PRA, we estimate 

the annual incremental paperwork 

burden for Form 10–K under the 

proposed amendments would be 

approximately 1 hour per form.141 We 

estimate the annual incremental 

paperwork burden for Form 10–Q under 

the proposed amendments would be 

approximately 1 hour per form. Our 

estimates below also account for the fact 

that each issuer would only be required 

to include additional disclosure in 

either the Form 10–K or one of the 

quarterly Form 10–Q filings each year. 

3. Securities Act Registration Statements 

and Exchange Act Registration 

Statements 

For purposes of the PRA, in the case 

of reporting companies, we estimate the 

annual incremental paperwork burden 

for Securities Act and Exchange Act 

registration statements under the 

proposed amendments would be 

approximately 2 hours per form, which 

represents the additional burden 

associated with our proposed 

amendments to CD&A. In making our 

estimates, we note that the additional 

burdens in CD&A would only apply to 

issuers who have conducted a prior 

shareholder advisory vote and would 

not apply, for example, to issuers 

making an initial filing on Form S–1 or 

Form S–11. 

4. Merger Proxies, Tender Offer 

Documents and Schedule 13E–3 

For purposes of the PRA, in the case 

of reporting companies, we estimate the 

annual incremental paperwork burden 

for merger proxy statements, registration 

statements on Form S–4 and F–4 to be 

21 hours per form, as these forms would 

be required to include additional 

disclosures under Item 24 of Schedule 

14A and Item 402(t) of Regulation S–K. 

We estimate the annual incremental 

paperwork burden for merger 

information statements, tender offer 

documents and tender offer solicitation/ 

recommendation statements and 

Schedules 13E–3 to be 20 hours per 

form, as these forms would not be 

required to include additional 

disclosure under Item 24 of Schedule 

14A. 

The tables below illustrate the total 

annual compliance burden of the 

collection of information in hours and 

in cost under the proposed amendments 

for annual reports; quarterly reports; 

proxy and information statements; Form 

10; registration statements on Forms 

S–1, S–4, F–4, S–11, and N–2; and 

Regulation S–K.142 The burden 

estimates were calculated by 

multiplying the estimated number of 

responses by the estimated average 

amount of time it would take an issuer 

to prepare and review the proposed 

disclosure requirements. For the 

Exchange Act reports on Form 10–K and 

Form 10–Q, and the proxy statements 

we estimate that 75% of the burden of 

preparation is carried by the company 

internally and that 25% of the burden 

of preparation is carried by outside 

professionals retained by the issuer at 

an average cost of $400 per hour. For the 

registration statements on Forms S–1, 

S–4, F–4, S–11, and N–2, and the 

Exchange Act registration statement on 

Form 10, we estimate that 25% of the 

burden of preparation is carried by the 

issuer internally and that 75% of the 

burden of preparation is carried by 

outside professionals retained by the 

issuer at an average cost of $400 per 

hour. There is no change to the 

estimated burden of the collections of 

information under Regulation S–K 

because the burdens that this regulation 

imposes are reflected in our revised 

estimated burden for the forms. The 

portion of the burden carried by outside 

professionals is reflected as a cost, while 

the portion of the burden carried by the 

issuer internally is reflected in hours. 

TABLE 1—INCREMENTAL PAPERWORK BURDEN UNDER THE PROPOSED AMENDMENTS FOR ANNUAL REPORTS; QUARTERLY

REPORTS; PROXY AND INFORMATION STATEMENTS

Number of 

responses143

Incremental 

burden 

hours/form 

Total 

incremental 

burden hours 

75% 

Company 

25% 

Professional 

Professional 

costs 

(A) (B) (C)=(A)*(B) (D)=(C)*0.75 (E)=(C)*0.25 (F)=(E)*$400 

10–K144 .................................................... 1,803 1 1,803 1,352 451 $180,400 

10–Q ........................................................ 5,409 1 5,409 4,057 1,352 540,800 

Form 10 145 .............................................. 9 2 18 4 14 5,600 

DEF 14A146 ............................................. 7,212 ........................ ........................ ........................ ........................ ........................

Accel. Filers ............................................. 6,112 3 18,336 13,752 4,584 1,833,600 

SRC Filers ................................................ 1,100 1 1,100 825 275 110,000 


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143The number of responses reflected in the table 

equals the actual number of forms and schedules 

filed with the Commission during the 2009 calendar 

year, adjusted to reflect the estimated number of 

forms and schedules that would be required to 

include additional disclosure under our rules as 

proposed. As explained below in notes 144 through 

146, we have reduced the number of estimated 

filings to reflect that the additional disclosure 

requirements as proposed would only apply to a 

smaller number of the forms filed. 

144We calculated the burden hours for Forms 

10–K and 10–Q based on the number of proxy 

statements filed with the Commission during the 

2009 calendar year. We assumed that there would 

be an aggregate equal number of Forms 10–K and 

10–Q to disclose the issuer’s plans with respect to 

the frequency vote as the number of proxy 

statements and further assumed that 75% of issuers 

would disclose this information on Form 10–Q and 

25% would disclose this information on Form 

10–K. 

145The burden allocation for Form 10 uses a 25% 

internal to 75% outside professional allocation. We 

have reduced the number of estimated Form 10 

filings to reflect that approximately 95% of these 

forms would not require additional disclosure, as 

new disclosure required under Item 402 as 

proposed would only relate to issuers in spin-off 

transactions that are disclosing compensation of 

public parent companies that have conducted a 

prior shareholder vote on executive compensation. 

146The estimates for Schedule 14A and Schedule 

14C are separated to reflect our estimate of the 

burden hours and costs related to the proposed 

amendments to CD&A which would be applicable 

to companies that are large accelerated filers, 

accelerated filers, and non-accelerated filers (that 

are not smaller reporting companies), but would not 

be applicable to smaller reporting companies. 

147The number of responses reflected in the table 

equals the actual number of forms and schedules 

filed with the Commission during the 2009 calendar 

year, adjusted to reflect the estimated number of 

forms and schedules that would be required to 

include additional disclosure under our rules as 

proposed. As explained below in notes 148 through 

152, we have reduced the number of estimated 

filings to reflect that the additional disclosure 

requirements as proposed would only apply to a 

smaller number of the forms filed. 

148We have reduced the number of estimated 

Form S–1 and Form S–11 filings to reflect that 

approximately 60% of these forms would not 

require additional disclosure, as new disclosure 

required under Item 402 as proposed would only 

relate to issuers who are already public companies 

and have conducted a prior shareholder vote on 

executive compensation. 

149We have reduced the number of estimated 

Form S–4 and Form F–4 filings to reflect an 

approximate 75% of these forms which will not 

relate to mergers or similar transactions but will be 

other transactions (e.g., holding company 

formations and financings) to which the amended 

rules would not apply. 

150We have reduced the number of estimated 

DEFM14C filings to reflect an approximate 15% of 

these forms, which will not relate to merger 

transactions but will involve dissolutions and 

similar transactions. 

151We have reduced the number of estimated 

Schedules TO–T, 14D–9 and 13E–3 to reflect the 

approximate number of these filings to which the 

proposed rules would apply, based on the total 

number of filings from calendar year 2009. We have 

substantially reduced the number of Schedules 

13E–3 to avoid double counting, as the majority of 

these forms are filed in conjunction with a DEF14A. 

In addition, we have reduced the number of 

Schedule TO–T filings as we anticipate that some 

bidders would incorporate by reference disclosure 

in Schedule 14D–9 and not incur an additional 

disclosure burden. 

152We have reduced the number of estimated 

Form N–2 filings to reflect that 29 filings were made 

by business development companies during 

calendar year 2009, because only business 

development companies would be subject to the 

proposed disclosure required under Item 402 on 

Form N–2. 

TABLE 1—INCREMENTAL PAPERWORK BURDEN UNDER THE PROPOSED AMENDMENTS FOR ANNUAL REPORTS; QUARTERLY

REPORTS; PROXY AND INFORMATION STATEMENTS—Continued 

Number of 

responses143

Incremental 

burden 

hours/form 

Total 

incremental 

burden hours 

75% 

Company 

25% 

Professional 

Professional 

costs 

(A) (B) (C)=(A)*(B) (D)=(C)*0.75 (E)=(C)*0.25 (F)=(E)*$400 

DEF 14C .................................................. 582 ........................ ........................ ........................ ........................ ........................

Accel. Filers ............................................. 482 2 964 723 241 96,400 

SRC Filers ................................................ 100 0 0 0 0 $0 

Reg. S–K .................................................. N/A N/A N/A N/A N/A N/A 

Total .................................................. ........................ ........................ 27,630 20,713 ........................ 2,766,800 

TABLE 2—INCREMENTAL PAPERWORK BURDEN UNDER THE PROPOSED AMENDMENTS FOR REGISTRATION STATEMENTS, 

MERGER PROXY AND INFORMATION STATEMENTS, TENDER OFFER DOCUMENTS AND SCHEDULES 13E–3 

Number of 

responses147

Incremental 

burden 

hours/form 

Total 

incremental 

burden hours 

25% 

Company 

75% 

Professional 

Professional 

costs 

(A) (B) (C)=(A)*(B) (D)=(C)*0.25 (E)=(C)*0.75 (F)=(E)*$400 

Form S–1 148 ............................................ 485 2 970 243 727 $290,800 

Form S–11 ............................................... 22 2 44 11 33 13,200 

Form S–4 149 ............................................ 499 21 10,479 2,620 7,859 3,143,600 

Form F–4 ................................................. 27 21 567 142 425 170,000 

DEFM 14A ............................................... 137 21 2,877 719 2,158 863,200 

DEFM 14C 150 .......................................... 14 20 280 70 210 84,000 

Schedule TO–T 151 ................................... 50 20 1,000 250 750 300,000 

Schedule 14D–9 ...................................... 77 20 1,540 385 1,155 462,000 

Schedule 13E–3 ....................................... 5 20 100 25 75 30,000 

Form N–2 152 ............................................ 29 2 58 14 44 17,600 

Reg. S–K .................................................. N/A N/A N/A N/A N/A N/A 

Total .................................................. ........................ ........................ 17,915 4,479 ........................ 5,374,400 

C. Request for Comment 

Pursuant to 44 U.S.C. 3506(c)(2)(B), 

we request comment to: 

• Evaluate whether the proposed 

collections of information are necessary 

for the proper performance of the 

functions of the Commission, including 

whether the information will have 

practical utility; 

• Evaluate the accuracy of our 

estimate of the burden of the proposed 

collections of information; 

• Determine whether there are ways 

to enhance the quality, utility, and 


jlentini on DSKJ8SOYB1PROD with PROPOSALS3
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153According to the Dodd-Frank Wall Street 

Reform and Consumer Protection Act Conference 

Report at page 872, Section 951 is ‘‘designed to 

address shareholder rights and executive 

compensation practices.’’ 

clarity of the information to be 

collected; 

• Evaluate whether there are ways to 

minimize the burden of the collections 

of information on those who respond, 

including through the use of automated 

collection techniques or other forms of 

information technology; and 

• Evaluate whether the proposed 

amendments will have any effects on 

any other collections of information not 

previously identified in this section. 

Any member of the public may direct 

to us any comments concerning the 

accuracy of these burden estimates and 

any suggestions for reducing the 

burdens. Persons who desire to submit 

comments on the collection of 

information requirements should direct 

their comments to OMB, Attention: 

Desk Officer for the Securities and 

Exchange Commission, Office of 

Information and Regulatory Affairs, 

Room 10102, New Executive Office 

Building, Washington, DC 20503 and 

should send a copy to Elizabeth M. 

Murphy, Secretary, Securities and 

Exchange Commission, 100 F Street, 

NE., Washington, DC 20549–1090, with 

reference to File No. S7–31–10. 

Requests for materials submitted to the 

OMB by us with regard to these 

collections of information should be in 

writing, refer to File No. S7–31–10 and 

be submitted to the Securities and 

Exchange Commission, Office of 

Investor Education and Advocacy, 100 F 

Street, NE., Washington, DC 20549– 

0213. Because OMB is required to make 

a decision concerning the collections of 

information between 30 and 60 days 

after publication, your comments are 

best assured of having their full effect if 

OMB receives them within 30 days of 

publication. 

IV. Cost-Benefit Analysis 

A. Introduction 

We are proposing rulemaking to 

implement and supplement the 

provisions of the Dodd-Frank Act 

relating to shareholder approval of 

executive compensation and disclosure 

and shareholder approval of golden 

parachute compensation arrangements. 

Section 951 of the Dodd-Frank Act 

amends the Exchange Act by adding 

new Section 14A. New Section 

14A(a)(1) requires companies to conduct 

a separate shareholder advisory vote to 

approve the compensation of 

executives. Section 14A(a)(2) requires 

companies to conduct a separate 

shareholder advisory vote to determine 

how often an issuer will conduct a 

shareholder advisory vote on executive 

compensation. In addition, Section 

14A(b) requires companies soliciting 

votes to approve merger or acquisition 

transactions to provide disclosure of 

certain ‘‘golden parachute’’ 

compensation arrangements and, when 

such arrangements have not been 

included in the shareholder advisory 

vote on executive compensation, to 

conduct a separate shareholder advisory 

vote to approve the golden parachute 

compensation arrangements.153

We are proposing new Rule 14a–21 to 

implement Section 14A(a)(1) by 

providing separate shareholder advisory 

votes to approve executive 

compensation, to approve the frequency 

of such votes on executive 

compensation, and to approve golden 

parachute compensation arrangements 

at shareholder meetings at which 

shareholders are asked to approve 

merger transactions. In addition to the 

votes required by Section 14A, we are 

also proposing a new Item 24 of 

Schedule 14A to elicit disclosure, 

similar to our approach with respect to 

TARP companies providing shareholder 

advisory votes on executive 

compensation, regarding the effect of 

the shareholder votes required by Rule 

14a–21, including whether the votes are 

non-binding. 

Our proposed new Item 402(t) of 

Regulation S–K implements and 

supplements the statutory requirement 

in Section 14A(b)(1) to promulgate rules 

for the clear and simple disclosure of 

golden parachute compensation 

arrangements that the soliciting person 

has with its named executive officers (if 

the acquiring issuer is not the soliciting 

person) or that it has with the named 

executive officers of the acquiring issuer 

that relate to the merger transaction. In 

addition, Item 402(t), as proposed, 

would supplement the requirements of 

Section 14A(b)(1) by requiring 

disclosure of golden parachute 

compensation arrangements between 

the acquiring company and the named 

executive officers of the target company 

if the target company is the soliciting 

person. 

Our proposed amendments to Item 5 

of Schedule 14A would require 

disclosure regarding golden parachute 

compensation arrangements in 

accordance with Section 14A(b)(1) of 

the Exchange Act. We are also 

proposing that additional disclosure 

regarding golden parachute 

compensation arrangements be required 

in connection with other transactions. 

We have proposed amendments to 

Regulation M–A, Schedule 14D–9 and 

Schedule 13E–3 that would require 

additional disclosure regarding golden 

parachute compensation arrangements 

in connection with Rule 13e–3 goingprivate transactions and tender offers. 

We are also proposing amendments to 

Item 402 of Regulation S–K to require 

additional Compensation Discussion 

and Analysis disclosure about the 

issuer’s response to the shareholder vote 

on executive compensation and to 

provide additional disclosure about 

golden parachute compensation 

arrangements. We are also proposing 

amendments to Form 10–K and Form 

10–Q to require disclosure regarding the 

issuer’s action as a result of the 

shareholder advisory vote on the 

frequency of shareholder votes on 

executive compensation. 

We are proposing an amendment to 

Rule 14a–4, which relates to the form of 

proxy that issuers are required to 

include with their proxy materials, to 

require that issuers present four choices 

to their shareholders in connection with 

the advisory vote on frequency. We are 

also proposing an amendment to Rule 

14a–6 to add the shareholder votes on 

executive compensation and the 

frequency of shareholder votes on 

executive compensation required by 

Section 14A(a) to the list of items that 

do not trigger the filing of a preliminary 

proxy statement. In addition, we are 

proposing an amendment to Rule 14a– 

8, adding a note to Rule 14a–8(i)(10) to 

clarify the status of shareholder 

proposals relating to the approval of 

executive compensation or the 

frequency of shareholder votes 

approving executive compensation. 

Our proposed rulemaking, which 

implements the relevant provisions of 

the Dodd-Frank Act, will directly affect 

most public companies as well as 

potential private acquirers. Our 

proposed rules implement the 

shareholder advisory vote requirements 

of Section 14A, promulgate rules for 

additional disclosure in accordance 

with Section 14A(b)(1), and provide for 

additional disclosure, not required by 

Section 14A, relating to the shareholder 

advisory votes. In addition, our 

proposed rules expand the required 

disclosure of Section 14A(b)(1) to 

require disclosure of arrangements 

between additional parties, namely 

agreements between the acquiring 

company and named executive officers 

of the target company, and require 

disclosure with respect to additional 

transactions, including certain tender 

offers and Rule 13e–3 going-private 

transactions. As discussed below, the 

enhanced disclosure required by our 

proposed rulemaking regarding the 

shareholder approval of executive 


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compensation and companies’ 

responses to shareholder votes would 

provide shareholders and investors with 

timely information about such votes that 

is consistent with the information 

required to be provided under the Act 

and that would enhance the operation of 

our rules pursuant to the Act. The 

enhanced disclosure regarding golden 

parachute compensation would provide 

a more complete picture of the 

compensation to shareholders as they 

consider voting and investment 

decisions relating to mergers and similar 

transactions. 

B. Benefits 

The proposed rulemaking is intended 

to implement and supplement the 

requirements of Section 14A of the 

Exchange Act as set forth in Section 951 

of the Dodd-Frank Act. The proposed 

amendments also provide for enhanced 

disclosure relating to the shareholder 

advisory votes required by Exchange 

Act Section 14A and how an issuer’s 

consideration of such votes affects its 

compensation policies and decisions. 

Our proposed rules would not only 

implement the shareholder advisory 

votes required by Section 14A, but 

would also require additional disclosure 

addressing how issuers have considered 

these required shareholder advisory 

votes, and if so, how such votes have 

affected the companies’ compensation 

policies and decisions. 

We believe the enhanced disclosures 

about the results of the shareholder 

advisory vote on the frequency of the 

approval of executive compensation 

would provide timely information to 

shareholders about the issuer’s plans for 

future shareholder advisory votes. Our 

proposed enhanced disclosure and 

proposed amendments to the CD&A 

requirements in Item 402(b) of 

Regulation S–K about an issuer’s 

consideration of the results of a 

shareholder vote to approve executive 

compensation and how that 

consideration has affected its 

compensation policies and decisions 

would benefit shareholders and other 

market participants by providing 

potentially useful information for voting 

and investment decisions. 

Our proposed rules would also 

specify how the shareholder advisory 

votes required by Section 14A(a) relate 

to existing shareholder advisory votes 

required for issuers with outstanding 

indebtedness under TARP. In our view, 

because of the similarity of the separate 

annual say-on-pay vote requirements, a 

company with indebtedness under 

TARP need only provide one annual 

shareholder advisory vote. As we have 

discussed above, we have indicated that 

the annual shareholder advisory vote 

under EESA would fulfill the 

requirements for the shareholder vote 

pursuant to Section 14A(a)(1) and Rule 

14a–21(a). We believe this benefits such 

companies by reducing confusion and 

burdens of the two requirements by 

specifying that two separate annual 

shareholder votes are not required. In 

addition, because issuers with 

indebtedness under TARP must conduct 

an annual shareholder advisory vote on 

executive compensation, we have 

proposed an exemption from the 

frequency vote required by Section 

14A(a)(2) and Rule 14a–21(b) until the 

issuer repays all indebtedness under 

TARP. We believe this benefits such 

issuers and their shareholders by 

avoiding the cost and confusion of 

conducting a vote on the frequency of a 

shareholder advisory vote when the 

frequency of such a vote is mandated by 

another requirement. 

In our proposed rules, we also 

provide guidance for issuers and 

shareholders regarding the interaction of 

the shareholder advisory votes required 

by Section 14A and shareholder 

proposals under Rule 14a–8 by 

proposing a note to Rule 14a–8(i)(10). 

The proposed note would reduce 

potential confusion among shareholders 

and issuers with respect to what may be 

excluded under our rules by providing 

for the exclusion of certain shareholder 

proposals that the company has 

substantially implemented, while 

preserving the ability of shareholders to 

make proposals relating to executive 

compensation. 

New proposed Item 402(t) of 

Regulation S–K would require narrative 

and tabular disclosure of golden 

parachute compensation arrangements 

in the clear and simple form required by 

Section 14A(b)(1) of the Exchange Act. 

Because Section 14A(b)(1) requires that 

disclosure not only be in a clear and 

simple form, but also that it include an 

aggregate total of all golden parachute 

compensation for each named executive 

officer, we have proposed Item 402(t) to 

require that such disclosure appear in a 

table. The tabular format is designed to 

provide investors with clear disclosure 

about golden parachute compensation 

that is comparable across different 

issuers and transactions and make the 

information more accessible. In addition 

to the tabular disclosure, we are also 

proposing narrative disclosure to 

provide additional context and provide 

disclosure not suitable to the tabular 

format. Our approach is similar to the 

existing approach to executive 

compensation disclosure in Item 402 of 

Regulation S–K and provides a focused 

manner in which to present and 

quantify golden parachute 

compensation. Narrative disclosure 

supplements the tables by providing 

additional context and discussion of the 

numbers presented in the table. We 

believe that the proposed combination 

of narrative and tabular disclosure 

would provide the clearest picture of 

the full scope of golden parachute 

compensation in the clear and simple 

format required by Section 14A(b)(1). 

Because Section 14A(b)(1)’s 

disclosure requirements are limited to 

agreements or understandings between 

the person conducting the solicitation 

and any named executive officers of the 

issuer or any named executive officers 

of the acquiring issuer if the person 

conducting the solicitation is not the 

acquiring issuer, we have formulated 

proposed Item 402(t) to require 

disclosure, in addition to the disclosure 

mandated by Section 14A(b)(1), of 

agreements or understandings between 

the acquiring company and the named 

executive officers of the target company. 

As proposed, Item 402(t) would require 

disclosure of all golden parachute 

compensation relating to the merger 

among the target and acquiring 

companies and the named executive 

officers of each in order to cover the full 

scope of golden parachute 

compensation applicable to the 

transaction. By providing disclosure of 

the full scope of golden parachute 

compensation, we believe issuers would 

provide more detailed and 

comprehensive information to 

shareholders to consider when making 

their voting or investment decisions. 

Likewise, additional disclosure on 

golden parachute compensation, 

without regard to whether the 

transaction is structured as a merger, a 

tender offer or a Rule 13e–3 goingprivate transaction that is not subject to 

Regulation 14A, would benefit 

shareholders and other market 

participants by allowing them to timely 

and more accurately assess the 

transaction and evaluate with greater 

acuity the golden parachute 

compensation that named executive 

officers could expect to receive and the 

related potential interests such officers 

might have in pursuing and/or 

supporting a change in control 

transaction. While our existing 

disclosure requirements include much 

of this disclosure, the specificity and 

narrative and tabular format of proposed 

Item 402(t) would allow for a clear 

presentation of the full scope of the 

information. Furthermore, by 

standardizing disclosure of golden 

parachute compensation arrangements 

across different transaction structures, 

our proposed rules would enable 


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shareholders to compare more easily 

such compensation among various types 

of change in control transactions and 

structures. In addition, our proposed 

rules would also enable the 

shareholders of the acquirer to timely 

and more accurately assess the cost of 

the acquisition transaction in proxy 

statements for which additional 

disclosure is required pursuant to Note 

A of Schedule 14A where acquirer 

shareholders do not vote on the merger 

transaction but vote to approve another 

proposal such as the issuance of shares 

or a stock split. 

We have proposed such disclosure in 

both tabular and narrative formats, with 

disclosure of aggregate total 

compensation, in accordance with the 

requirement of Section 14A(b)(1) that 

such disclosure be in a clear and simple 

form. To the extent investors expect to 

see information about all of the 

economic benefits that may accrue to an 

executive in one location of the proxy 

statement (including golden parachute 

arrangements and other compensation, 

such as future employment contracts), 

the benefit of this disclosure may be 

limited since, as proposed, the 

information about other executive 

compensation that may be disclosed in 

proxy materials would not need to be 

included in the tabular format pursuant 

to Item 402(t) of Regulation S–K. 

Our proposed rulemaking would also 

benefit issuers by specifying how they 

must comply with the requirements of 

Exchange Act Section 14A in the 

context of the federal proxy rules. The 

proposed rulemaking would eliminate 

uncertainty that may exist among 

issuers and other market participants, if 

we did not propose any rules, regarding 

what is necessary under the 

Commission’s proxy rules when 

conducting a shareholder vote required 

under Exchange Act Section 14A. The 

proposed rules would specify how the 

statutory requirements operate in 

connection with the federal proxy rules 

and accordingly, we believe the 

proposed rulemaking would promote 

better compliance with the requirements 

of Exchange Act Section 14A and 

reduce the amount of management time 

and financial resources necessary to 

ensure that issuers comply with their 

obligations under both Exchange Act 

Section 14A and the federal proxy rules. 

This would benefit issuers, their 

shareholders and other market 

participants. 

C. Costs 

We recognize that the proposed 

amendments would impose new 

disclosure requirements on companies 

and are likely to result in costs related 

to information collection. The proposed 

rulemaking that requires the disclosure 

of executive compensation in a tabular 

format is likely to result in certain costs. 

We expect these costs, however, to be 

limited since much of the compensation 

required to be disclosed under our 

proposed rulemaking is currently 

required to be disclosed in narrative 

format in the existing disclosure regime. 

We have proposed new Item 402(t) to 

implement the requirement of Section 

14A(b)(1) of the Exchange Act that we 

promulgate rules for disclosure of 

golden parachute compensation 

arrangements in a clear and simple 

form, which we believe is best provided 

in both narrative and tabular format. In 

addition to the required disclosure 

under Section 14A(b)(1), we have also 

proposed expanding the disclosure to 

cover agreements between the acquiring 

company and the named executive 

officers of a target company in a merger 

or similar transaction. Though this 

additional disclosure would result in 

certain additional costs for issuers 

preparing a merger proxy, we believe 

that the additional disclosure is 

appropriate in order to provide 

shareholders information about the full 

scope of golden parachute 

compensation applicable to the 

transaction. There may also be certain 

indirect costs to issuers and 

shareholders as a result of our proposed 

rules, as the additional disclosure of 

golden parachute compensation may 

result in increased transactional 

expenses in the form of additional 

advisers and consultants, increased time 

to prepare disclosure documents, and 

increased time and expense to negotiate 

compensation arrangements. 

Furthermore, companies engaging in 

or subject to a third-party tender offer or 

Rule 13e–3 going-private transaction 

may face increased costs because of the 

required disclosure of golden parachute 

compensation arrangements, including 

the required table and aggregate totals, 

under the proposed rulemaking. In 

addition, companies soliciting proxies 

or consents for transactions for which 

additional disclosure is required 

pursuant to Note A of Schedule 14A 

may face increased costs as well due to 

the additional disclosure requirements 

of Item 5 of Schedule 14A. We have 

proposed these disclosure requirements 

that go beyond the requirements of 

Section 14A(b)(1) because we believe 

the proposed rules would reduce the 

regulatory disparity that might 

otherwise result from treating such 

transactions differently from mergers. 

As noted above, there may also be 

additional indirect costs relating to such 

increased disclosure, as well as costs 

associated with obtaining compensation 

information from the other parties 

involved in a transaction in order to 

fulfill the issuer’s disclosure obligations. 

The expanded Compensation 

Discussion and Analysis disclosure 

under the proposed rulemaking may 

also result in costs associated with 

drafting disclosure that addresses 

whether, and if so, how the results of a 

shareholder vote on executive 

compensation were considered in 

determining the issuer’s compensation 

policies and decisions and any resultant 

effect on those compensation policies 

and decisions. Similarly, the proposed 

revisions to the periodic reporting 

requirements on Forms 10–K and 10–Q 

may result in costs associated with 

assessing the results of a shareholder 

vote on the frequency of shareholder 

votes to approve executive 

compensation and drafting the 

additional disclosure regarding the 

company’s plans to conduct votes in the 

future. Some of these costs could 

include the cost of hiring additional 

advisors, such as attorneys, to assist in 

the analysis and drafting. 

We believe that these costs would not 

be unduly burdensome given that most 

of the disclosure is covered by our 

existing disclosure requirements, even 

though we are proposing that such 

disclosure be included in both narrative 

and tabular format. In addition to the 

existing narrative requirements, we are 

proposing tabular disclosure with an 

aggregate total and no de minimis 

threshold for perquisites. We expect that 

there will be incremental costs 

associated with drafting the additional 

disclosure, but that much of the 

information would be readily obtainable 

by the parties given existing disclosure 

requirements and as part of the due 

diligence process prior to drafting the 

transaction documents. 

In addition to the direct costs 

associated with the required disclosure, 

the proposed rule might create 

additional indirect costs for private 

companies that may be engaged in 

takeovers of public companies. We do 

not expect, however, the specific and 

detailed disclosure and the shareholder 

advisory vote regarding golden 

parachutes to diminish the number of 

takeover transactions. 

Our proposed note to Rule 14a– 

8(i)(10) may also impose certain costs 

on shareholders as our proposal would 

permit issuers to exclude certain 

shareholder proposals that would 

otherwise not be excludable under our 

rules. In addition, our proposals may 

impose certain indirect costs on 

shareholders who might pursue 

alternative means to communicate their 


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154 5 U.S.C. 603. 

155 15 U.S.C. 78w(a). 

156 15 U.S.C. 77b(b). 

157 15 U.S.C. 78c(f). 

positions regarding the frequency of sayon-pay votes. 

For purposes of the PRA, we have 

estimated the collection of information 

burden and cost. However, we 

acknowledge that the PRA estimates do 

not reflect the full magnitude of the 

economic costs considered above. The 

estimates of total amount of time and 

resources spent in preparing are 25,202 

labor hours and $8,142,000 costs. Of 

these, 15,300 labor hours and 

$2,040,000 are estimated for annual 

meeting proxy and information 

statements, 5,409 labor hours and 

$721,200 are estimated for periodic 

reports, 272 labor hours and $327,200 

for Securities Act registration statements 

(excluding Forms S–4 and F–4), 

Exchange Act registration statements, 

and Investment Company Act 

registration statements, and 4,211 labor 

hours and $5,052,800 for merger proxies 

and information statements, registration 

statements on Forms S–4 and F–4, 

tender offer statements and Schedules 

13E–3 for Rule 13e–3 transactions that 

are not otherwise subject to Regulation 

14A. 

D. Request for Comment 

We request data to quantify the costs 

and the value of the benefits described 

above. We seek estimates of these costs 

and benefits, as well as any costs and 

benefits not already defined, that may 

result from the adoption of these 

proposed amendments. We also request 

qualitative feedback on the nature of the 

benefits and costs described above and 

any benefits and costs we may have 

overlooked. 

V. Small Business Regulatory 

Enforcement Fairness Act 

For purposes of the Small Business 

Regulatory Enforcement Fairness Act of 

1996, or ‘‘SBREFA,’’ 154 we solicit data to 

determine whether the proposals 

constitute a ‘‘major’’ rule. Under 

SBREFA, a rule is considered ‘‘major’’ 

where, if adopted, it results or is likely 

to result in: 

• An annual effect on the economy of 

$100 million or more (either in the form 

of an increase or a decrease); 

• A major increase in costs or prices 

for consumers or individual industries; 

or 

• Significant adverse effects on 

competition, investment or innovation. 

We request comment on the potential 

impact of the proposed amendments on 

the U.S. economy on an annual basis, 

any potential increase in costs or prices 

for consumers or individual industries, 

and any potential effect on competition, 

investment or innovation. 

Commentators are requested to provide 

empirical data and other factual support 

for their views if possible. 

VI. Consideration of Impact on the 

Economy, Burden on Competition, and 

Promotion of Efficiency, Competition 

and Capital Formation 

Section 23(a)(2) of the Exchange 

Act 155 also requires us, when adopting 

rules under the Exchange Act, to 

consider the impact that any new rule 

would have on competition. Section 

23(a)(2) prohibits us from adopting any 

rule that would impose a burden on 

competition not necessary or 

appropriate in furtherance of the 

purposes of the Exchange Act. In 

addition, Section 2(b) 156 of the 

Securities Act and Section 3(f) 157 of the 

Exchange Act require us, when engaging 

in rulemaking where we are required to 

consider or determine whether an action 

is necessary or appropriate in the public 

interest, to also consider whether the 

action will promote efficiency, 

competition, and capital formation. 

Our proposed amendments would 

implement the Section 14A requirement 

for shareholder advisory votes to 

approve executive compensation, the 

frequency of such votes, and golden 

parachute compensation arrangements 

in connection with merger and similar 

transactions. We have proposed certain 

additional disclosure requirements to 

provide investors with additional 

information about these required votes 

and to apply the required disclosure 

from Section 14A(b)(1) to certain other 

agreements and transaction structures. 

We do not believe that the additional 

disclosure we have proposed in our 

rulemaking would impose a burden on 

competition. 

The proposed amendments would not 

only implement the requirements of 

Section 14A of the Exchange Act, but 

would also help ensure that 

shareholders receive disclosure 

regarding the required votes, the nature 

of an issuer’s responsibilities to hold the 

votes under Section 14A, and the 

issuer’s consideration of the results of 

the votes and the effect of such 

consideration on the issuer’s 

compensation policies and decisions. 

The proposed amendments would also 

enhance the transparency of a 

company’s compensation policies. As 

discussed in greater detail above, we 

believe these benefits would be 

achieved without imposing any 

significant additional burdens on 

issuers. As a result, the proposed 

amendments should improve the ability 

of investors to make informed voting 

and investment decisions, and, therefore 

lead to increased efficiency and 

competitiveness of the U.S. capital 

markets. 

We believe the proposed amendments 

would also benefit issuers and their 

shareholders by specifying how issuers 

must comply with the Dodd-Frank Act 

requirements, in the context of the 

federal proxy rules and our disclosure 

rules. By specifying how issuers must 

comply with the shareholder advisory 

votes and enhanced disclosure 

requirements from Section 14A, our 

proposed rules would allow for more 

consistent disclosure from all entities 

and clearer disclosure for shareholders. 

By reducing uncertainty, our proposed 

rules would permit issuers to more 

efficiently plan and draft disclosure 

documents, including annual meeting 

proxy statements, merger proxies, and 

tender offer and going-private 

documents. 

Our rules as proposed would require 

enhanced disclosure of golden 

parachute compensation arrangements 

in merger and similar transactions, 

regardless of how such transactions are 

structured. We believe the uniformity of 

our proposed disclosure requirements 

across different types of transactions 

would help competition as issuers 

would be able to structure such 

transactions as they see fit, without the 

additional disclosure required by 

Section 14A(b) weighing in favor of a 

particular transaction structure. Though 

our proposed rules would create 

additional, incremental disclosure 

burdens, we believe that our proposed 

rules would enhance capital formation 

by allowing for clearer disclosure, more 

informed voting decisions by investors, 

and consistency across different types of 

transactions. 

We request comment on whether the 

proposed amendments, if adopted, 

would impose a burden on competition. 

We also request comment on whether 

the proposed amendments, if adopted, 

would promote efficiency, competition, 

and capital formation. Commentators 

are requested to provide empirical data 

and other factual support for their view 

to the extent possible. 

VII. Initial Regulatory Flexibility Act 

Analysis 

This initial Regulatory Flexibility 

Analysis (IRFA) has been prepared in 

accordance with the Regulatory 

Flexibility Act. It relates to proposed 

revisions to the rules under the 

Exchange Act regarding the proxy 


jlentini on DSKJ8SOYB1PROD with PROPOSALS3
66614 Federal Register / Vol. 75, No. 208 / Thursday, October 28, 2010 / Proposed Rules 

158 5 U.S.C. 601(6). 

159 17 CFR 230.157. 

160 17 CFR 240.0–10(a). 

161Business development companies are a 

category of closed-end investment companies that 

are not required to register under the Investment 

Company Act [15 U.S.C. 80a–2(a)(48)]. 162 17 CFR 270.0–10(a). 

163Rule 12b–2 excludes business development 

companies from the definition of ‘‘smaller reporting 

companies.’’ 

solicitation process and related 

executive compensation disclosures. 

A. Reasons for, and Objectives of, the 

Proposed Action 

These proposals are designed to 

implement the requirements of Section 

951 of the Dodd-Frank Act, enhance the 

disclosure relating to the shareholder 

advisory votes required by Exchange 

Act Section 14A, and specify how our 

proxy rules would apply to such votes. 

Specifically, the proposals amend the 

proxy rules to require shareholder 

advisory votes to approve executive 

compensation, to approve the frequency 

of shareholder votes to approve 

executive compensation, and to approve 

golden parachute compensation 

arrangements in connection with merger 

transactions. Our proposals also require 

enhanced disclosure regarding an 

issuer’s consideration of these votes and 

the impact of such consideration on an 

issuer’s compensation policies and 

decisions. 

B. Legal Basis 

We are proposing the amendments 

pursuant to Sections 13, 14(a), 14A, 

23(a), and 36 of the Exchange Act. 

C. Small Entities Subject to the 

Proposed Action 

The proposed amendments would 

affect some companies that are small 

entities. The Regulatory Flexibility Act 

defines ‘‘small entity’’ to mean ‘‘small 

business,’’ ‘‘small organization,’’ or 

‘‘small governmental jurisdiction.’’ 158

The Commission’s rules define ‘‘small 

business’’ and ‘‘small organization’’ for 

purposes of the Regulatory Flexibility 

Act for each of the types of entities 

regulated by the Commission. Securities 

Act Rule 157 159 and Exchange Act Rule 

0–10(a) 160 defines a company, other 

than an investment company, to be a 

‘‘small business’’ or ‘‘small organization’’ 

if it has total assets of $5 million or less 

on the last day of its most recent fiscal 

year. We estimate that there are 

approximately 1,210 companies, other 

than investment companies, that may be 

considered small entities. The proposed 

amendments would affect small entities 

that have a class of securities that are 

registered under Section 12 of the 

Exchange Act. An investment company, 

including a business development 

company,161 is considered to be a ‘‘small 

business’’ if it, together with other 

investment companies in the same 

group of related investment companies, 

has net assets of $50 million or less as 

of the end of its most recent fiscal 

year.162 We believe that certain 

proposals would affect small entities 

that are business development 

companies who have a class of 

securities registered under Section 12 of 

the Exchange Act. We estimate that 

there are approximately 32 business 

development companies that may be 

considered small entities. 

D. Reporting, Recordkeeping, and Other 

Compliance Requirements 

The proposed disclosure amendments 

are designed to enhance the disclosure 

regarding the shareholder advisory votes 

required by Section 14A of the 

Exchange Act and provide additional 

disclosure about golden parachute 

compensation arrangements. These 

amendments would require small 

entities to provide: 

• Disclosure of the shareholder 

advisory votes required by Section 14A 

and the effects of such votes, including 

whether they are non-binding; 

• Disclosure of golden parachute 

arrangements described by Section 

14A(b)(1) of the Exchange Act in merger 

proxies, and additional disclosure not 

required by Section 14A(b)(1) in 

connection with tender offers and going 

private transactions; and 

• Disclosure of the issuer’s decision 

in light of the shareholder vote on the 

frequency of shareholder votes to 

approve executive compensation 

required by Section 14A(a)(2) of the 

Exchange Act as to how frequently the 

issuer will include a shareholder vote 

on the compensation of executives. 

E. Duplicative, Overlapping, or 

Conflicting Federal Rules 

We believe the proposed amendments 

would not duplicate, overlap, or conflict 

with other federal rules. 

F. Significant Alternatives 

The Regulatory Flexibility Act directs 

us to consider alternatives that would 

accomplish our stated objectives, while 

minimizing any significant adverse 

impact on small entities. In connection 

with the proposed disclosure 

amendments, we considered the 

following alternatives: 

• Establishing different compliance or 

reporting requirements or timetables 

that take into account the resources 

available to small entities; 

• Clarifying, consolidating, or 

simplifying compliance and reporting 

requirements under the rules for small 

entities; 

• Use of performance rather than 

design standards; and 

• Exempting small entities from all or 

part of the requirements. 

Currently, small entities that are 

smaller reporting companies under 

Exchange Act Rule 12b–12 are subject to 

some different compliance or reporting 

requirements under Regulation S–K and 

the proposed amendments would not 

affect these requirements.163 Under 

Regulation S–K, smaller reporting 

companies are permitted to provide 

abbreviated compensation disclosure 

with respect to the principal executive 

officer and two most highly 

compensated executive officers for the 

last two completed fiscal years. 

Specifically, smaller reporting 

companies may provide the executive 

compensation disclosure specified in 

Items 402(l) through (r) of Regulation 

S–K, rather than the corresponding 

disclosure specified in Items 402(a) 

through (k) of Regulation S–K. Items 

402(l) through (r) do not require smaller 

reporting companies to provide CD&A. 

Other than the proposed amendments to 

CD&A, the remaining proposed 

disclosure requirements would apply to 

smaller reporting companies to the same 

extent as larger issuers. 

As noted above, the proposed 

amendments to CD&A would not apply 

to smaller reporting companies. We are 

not proposing to expand the existing 

scaled disclosure requirements under 

Item 402 of Regulation S–K, or establish 

additional different compliance 

requirements or an exemption from 

coverage of the proposed amendments 

for smaller reporting companies. The 

proposed amendments would provide 

investors with enhanced disclosure 

regarding the shareholder votes required 

by Section 14A of the Exchange Act and 

the issuers’ consideration of the votes. 

We are proposing amendments to 

Item 5 of Schedule 14A, as well as other 

forms and schedules, to implement and 

supplement the requirement of Section 

14A(b)(1) to provide disclosure of 

golden parachute compensation 

arrangements in a clear and simple 

form. Under our proposed rules, all 

companies would be subject to the same 

golden parachute disclosure 

requirements. As proposed, Schedule 

14A would require the disclosure 

pursuant to Item 402(t) of Regulation 

S–K with respect to golden parachute 

compensation arrangements for merger 

proxies. Though much of the disclosure 


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required by our proposed amendment to 

Item 5 of Schedule 14A is currently 

required for all issuers, regardless of 

size, under our proposed rules such 

disclosure would be required to be 

included in a tabular format pursuant to 

Item 402(t) of Regulation S–K, which 

would include an aggregate total and 

specific quantification of various 

compensation elements. All companies, 

regardless of size, would also be subject 

to these additional disclosure 

requirements in connection with other 

transactions not required by Section 

14A(b)(1), including certain tender 

offers and Rule 13e–3 going-private 

transactions. 

In addition, our proposed 

amendments would require clear and 

straightforward disclosure of issuer’s 

responses to shareholder advisory votes, 

and of golden parachute compensation 

arrangements in connection with 

mergers and similar transactions. We 

have used design rather than 

performance standards in connection 

with the proposed amendments 

because, based on our past experience, 

we believe the proposed amendments 

would be more useful to investors if 

there were specific disclosure 

requirements. The proposed disclosures 

are intended to result in more 

comprehensive and clear disclosure. In 

addition, the specific disclosure 

requirements in the proposed 

amendments would promote consistent 

and comparable disclosure among all 

companies. 

We seek comment on whether we 

should exempt small entities from any 

of the proposed disclosures or scale the 

proposed amendments to reflect the 

characteristics of small entities and the 

needs of their investors. 

G. Solicitation of Comments 

We encourage the submission of 

comments with respect to any aspect of 

this Initial Regulatory Flexibility 

Analysis. In particular, we request 

comments regarding: 

• How the proposed amendments can 

achieve their objective while lowering 

the burden on small entities; 

• The number of small entity 

companies that may be affected by the 

proposed amendments; 

• The existence or nature of the 

potential impact of the proposed 

amendments on small entity companies 

discussed in the analysis; and 

• How to quantify the impact of the 

proposed amendments. 

Respondents are asked to describe the 

nature of any impact and provide 

empirical data supporting the extent of 

the impact. Such comments will be 

considered in the preparation of the 

Final Regulatory Flexibility Analysis, if 

the proposed rule amendments are 

adopted, and will be placed in the same 

public file as comments on the proposed 

amendments themselves. 

VIII. Statutory Authority and Text of 

the Proposed Amendments 

The amendments described in this 

release are being proposed under the 

authority set forth in Section 951 of the 

Dodd-Frank Wall Street Reform and 

Consumer Protection Act, Sections 3(b), 

6, 7, 10, and 19(a) of the Securities Act 

of 1933, and Sections 13, 14(a), 14A, 

23(a), and 36 of the Securities Exchange 

Act of 1934, as amended. 

List of Subjects in 17 CFR Parts 229, 

240 and 249 

Reporting and recordkeeping 

requirements, Securities. 

Text of the Proposed Amendments 

For the reasons set out in the 

preamble, the Commission proposes to 

amend title 17, chapter II, of the Code 

of Federal Regulations as follows: 

PART 229—STANDARD 

INSTRUCTIONS FOR FILING FORMS 

UNDER SECURITIES ACT OF 1933, 

SECURITIES EXCHANGE ACT OF 1934 

AND ENERGY POLICY AND 

CONSERVATION ACT OF 1975— 

REGULATION S–K 

1. The authority citation for part 229 

is amended by adding authority for 

§ 229.402 and § 229.1011 to read as 

follows: 

Authority: 15 U.S.C. 77e, 77f, 77g, 77h, 77j, 

77k, 77s, 77z–2, 77z–3, 77aa(25), 77aa(26), 

77ddd, 77eee, 77ggg, 77hhh, 777iii, 77jjj, 

77nnn, 77sss, 78c, 78i, 78j, 78l, 78m, 78n, 

78o, 78u–5, 78w, 78ll, 78mm, 80a–8, 80a–9, 

80a–20, 80a–29, 80a–30, 80a–31(c), 80a–37, 

80a–38(a), 80a–39, 80b–11, and 7201 et seq.; 

and 18 U.S.C. 1350, unless otherwise noted. 

* * * * * 

Section 229.402 is also issued under sec. 

951, Pub. L. 111–203, 124 Stat. 1376. 

Section 229.1011 is also issued under sec. 

951, Pub. L. 111–203, 124 Stat. 1376. 

* * * * * 

2. Amend § 229.402 by: 

a. Revising the last sentence of 

paragraph (a)(6)(ii); 

b. Removing ‘‘and’’ at the end of 

paragraph (b)(1)(v); 

c. Removing the period and adding in 

its place ‘‘; and’’ at the end of paragraph 

(b)(1)(vi); 

d. Adding paragraph (b)(1)(vii); 

e. Revising the last sentence of 

paragraph (m)(5)(ii); and 

f. Adding paragraph (t). 

The revisions read as follows: 

§ 229.402 (Item 402) Executive 

compensation. 

(a) * * * 

(6) * * * 

(ii) * * * Except with respect to the 

disclosure required by paragraph (t) of 

this Item, registrants may omit 

information regarding group life, health, 

hospitalization, or medical 

reimbursement plans that do not 

discriminate in scope, terms or 

operation, in favor of executive officers 

or directors of the registrant and that are 

available generally to all salaried 

employees. 

* * * * * 

(b) * * * 

(1) * * * 

(vii) Whether and if so, how the 

registrant has considered the results of 

previous shareholder advisory votes on 

executive compensation required by 

section 14A of the Exchange Act (15 

U.S.C. 78n–1) and previous shareholder 

advisory votes on executive 

compensation required by § 240.14a–20 

of this chapter in determining 

compensation policies and decisions 

and, if so, how that consideration has 

affected the registrant’s executive 

compensation decisions and policies. 

* * * * * 

(m) * * * 

(5) * * * 

(ii) * * * Except with respect to 

disclosure required by paragraph (t) of 

this Item, smaller reporting companies 

may omit information regarding group 

life, health, hospitalization, or medical 

reimbursement plans that do not 

discriminate in scope, terms or 

operation, in favor of executive officers 

or directors of the smaller reporting 

company and that are available 

generally to all salaried employees. 

* * * * * 

(t) Golden Parachute Compensation. 

(1) In connection with 

(i) Any proxy or consent solicitation 

material providing the disclosure 

required by section 14A(b)(1) of the 

Exchange Act (15 U.S.C. 78n–1(b)(1)) or 

(ii) Any proxy or consent solicitation 

that includes disclosure under Item 14 

of Schedule 14A (§ 240.14a–101) 

pursuant to Note A of Schedule 14A, 

with respect to each named executive 

officer of the acquiring company and the 

target company, provide the information 

specified in paragraphs (t)(2) and (3) of 

this section regarding any agreement or 

understanding, whether written or 

unwritten, between such named 

executive officer and the acquiring 

company or target company, concerning 

any type of compensation, whether 

present, deferred or contingent, that is 

based on or otherwise relates to an 


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acquisition, merger, consolidation, sale 

or other disposition of all or 

substantially all assets of the issuer, as 

follows: 

GOLDEN PARACHUTE COMPENSATION

Name 

Cash 

($) 

Equity 

($) 

Pension/ 

NQDC 

($) 

Perquisites/ 

benefits 

($) 

Tax 

reimbursement 

($) 

Other 

($) 

Total 

($) 

(a) (b) (c) (d) (e) (f) (g) (h) 

PEO 

PFO 

A 

B 

C 

(2) The table shall include, for each 

named executive officer: 

(i) The name of the named executive 

officer (column (a)); 

(ii) The aggregate dollar value of any 

cash severance payments, including but 

not limited to payments of base salary, 

bonus, and pro-rated non-equity 

incentive compensation plan payments 

(column (b)); 

(iii) The aggregate dollar value of: 

(A) Stock awards for which vesting 

would be accelerated; 

(B) In-the-money option awards for 

which vesting would be accelerated; 

and 

(C) Payments in cancellation of stock 

and option awards (column (c)): 

(iv) The aggregate dollar value of 

pension and nonqualified deferred 

compensation benefit enhancements 

(column (d)); 

(v) The aggregate dollar value of 

perquisites and other personal benefits 

or property, and health care and welfare 

benefits (column (e)); 

(vi) The aggregate dollar value of any 

tax reimbursements (column (f)); 

(vii) The aggregate dollar value of any 

other compensation that is based on or 

otherwise relates to the transaction not 

properly reported in columns (b) 

through (f) (column (g)); and 

(viii) The aggregate dollar value of the 

sum of all amounts reported in columns 

(b) through (g) (column (h)). 

Instructions to Item 402(t)(2) 

1. If this disclosure is included in a 

proxy or consent solicitation seeking 

approval of an acquisition, merger, 

consolidation, or proposed sale or other 

disposition of all or substantially all the 

assets of the registrant, or in a proxy or 

consent solicitation that includes 

disclosure under Item 14 of Schedule 

14A (§ 240.14a–101) pursuant to Note A 

of Schedule 14A, the disclosure 

provided by this table shall be 

quantified assuming that the triggering 

event took place on the latest 

practicable date, and that the price per 

share of the registrant’s securities is the 

closing market price as of the latest 

practicable date. Compute the dollar 

value of in-the-money option awards for 

which vesting would be accelerated by 

determining the difference between this 

price and the exercise or base price of 

the options. 

2. If this disclosure is included in a 

proxy solicitation for the annual 

meeting at which directors are elected 

for purposes of subjecting the disclosed 

agreements or understandings to a 

shareholder vote under section 

14A(a)(1) of the Exchange Act (15 U.S.C. 

78n–1(a)(1)), the disclosure provided by 

this table shall be quantified assuming 

that the triggering event took place on 

the last business day of the registrant’s 

last completed fiscal year, and the price 

per share of the registrant’s securities is 

the closing market price as of that date. 

Compute the dollar value of in-themoney option awards for which vesting 

would be accelerated by determining 

the difference between this price and 

the exercise or base price of the options. 

3. In the event that uncertainties exist 

as to the provision of payments and 

benefits or the amounts involved, the 

registrant is required to make a 

reasonable estimate applicable to the 

payment or benefit and disclose 

material assumptions underlying such 

estimates in its disclosure. In such 

event, the disclosure would require 

forward-looking information as 

appropriate. 

4. For each of columns (b) through (g), 

include a footnote quantifying each 

separate form of compensation included 

in the aggregate total reported. Include 

the value of all perquisites and other 

personal benefits or property. Individual 

perquisites and personal benefits shall 

be identified and quantified as required 

by Instruction 4 to Item 402(c)(2)(ix) of 

this section. For purposes of quantifying 

health care benefits, the registrant must 

use the assumptions used for financial 

reporting purposes under generally 

accepted accounting principles. 

5. For each of columns (b) through (h), 

include a footnote quantifying the 

amount payable attributable to a doubletrigger arrangement (i.e., amounts 

triggered by a change-in-control for 

which payment is conditioned upon the 

executive officer’s termination without 

cause or resignation for good reason 

within a limited time period following 

the change-in-control), specifying the 

time-frame in which such termination 

or resignation must occur in order for 

the amount to become payable, and the 

amount payable attributable to a singletrigger arrangement (i.e., amounts 

triggered by a change-in-control for 

which payment is not conditioned upon 

such a termination or resignation of the 

executive officer). 

6. A registrant conducting a 

shareholder advisory vote pursuant to 

§ 240.14a–21(c) of this chapter to cover 

new arrangements and understandings, 

and/or revised terms of agreements and 

understandings that were previously 

subject to a shareholder advisory vote 

pursuant to § 240.14a–21(a) of this 

chapter, shall provide two separate 

tables. One table shall disclose all 

golden parachute compensation, 

including both the arrangements and 

amounts previously disclosed and 

subject to a shareholder advisory vote 

under section 14A(a)(1) of the Exchange 

Act (15 U.S.C. 78n–1(a)(1)) and 

§ 240.14a–21(a) of this chapter and the 

new arrangements and understandings 

and/or revised terms of agreements and 

understandings that were previously 

subject to a shareholder advisory vote. 

The second table shall disclose only the 

new arrangements and/or revised terms 


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subject to the separate shareholder vote 

under section 14A(b)(2) of the Exchange 

Act and § 240.14a–21(c) of this chapter. 

7. In cases where this Item 402(t)(2) 

requires disclosure of arrangements 

between an acquiring company and the 

named executive officers of the 

soliciting target company, the registrant 

shall clarify whether these agreements 

are included in the separate shareholder 

advisory vote pursuant to § 240.14a– 

21(c) of this chapter by providing a 

separate table of all agreements and 

understandings subject to the 

shareholder advisory vote required by 

section 14A(b)(2) of the Exchange Act 

(15 U.S.C. 78n–1(b)(2)) and § 240.14a– 

21(c) of this chapter, if different from 

the full scope of golden parachute 

compensation subject to Item 402(t) 

disclosure. 

(3) Provide a succinct narrative 

description of any material factors 

necessary to an understanding of each 

such contract, agreement, plan or 

arrangement and the payments 

quantified in the tabular disclosure 

required by this paragraph. Such factors 

shall include, but not be limited to a 

description of: 

(i) The specific circumstances that 

would trigger payment(s); 

(ii) Whether the payments would or 

could be lump sum, or annual, 

disclosing the duration, and by whom 

they would be provided; and 

(iii) Any material conditions or 

obligations applicable to the receipt of 

payment or benefits, including but not 

limited to non-compete, nonsolicitation, non-disparagement or 

confidentiality agreements, including 

the duration of such agreements and 

provisions regarding waiver or breach of 

such agreements. 

Instruction to Item 402(t) 

1. A registrant that does not qualify as 

a ‘‘smaller reporting company,’’ as 

defined by § 229.10(f)(1) of this chapter, 

must provide the information required 

by this Item 402(t) with respect to the 

individuals covered by Items 

402(a)(3)(i), (ii) and (iii) of this section. 

A registrant that qualifies as a ‘‘smaller 

reporting company,’’ as defined by 

§ 229.10(f)(1) of this chapter, must 

provide the information required by this 

Item 402(t) with respect to the 

individuals covered by Items 

402(m)(2)(i) and (ii) of this section. 

2. The obligation to provide the 

information in this Item 402(t) shall not 

apply to agreements and understandings 

described in paragraph (t)(1) of this 

section with senior management of 

foreign private issuers, as defined in 

§ 240.3b–4 of this chapter. 

3. Amend § 229.1011 by redesignating 

paragraph (b) as paragraph (c) and 

adding new paragraph (b): 

The addition reads as follows: 

§ 229.1011 (Item 1011) Additional 

information. 

* * * * * 

(b) Furnish the information required 

by Item 402(t)(2) and (3) of this part 

(§ 229.402(t)(2) and (3)) and in the 

tabular format set forth in Item 402(t)(1) 

of this part (§ 229.402(t)(1)) with respect 

to each named executive officer 

(1) Of the subject company in a Rule 

13e–3 transaction; or 

(2) Of the issuer whose securities are 

the subject of a third-party tender offer, 

regarding any agreement or 

understanding, whether written or 

unwritten, between such named 

executive officer and the subject 

company, issuer, bidder, or the 

acquiring company, as applicable, 

concerning any type of compensation, 

whether present, deferred or contingent, 

that is based upon or otherwise relates 

to the Rule 13e–3 transaction or thirdparty tender offer. 

Instructions to Item 1011(b) 

1. The obligation to provide the 

information in paragraph (b) of this 

section shall not apply where the issuer 

whose securities are the subject of the 

Rule 13e–3 transaction or tender offer is 

a foreign private issuer, as defined in 

§ 240.3b–4 of this chapter. 

2. In connection with any Schedule 

TO (§ 240.14d–100 of this chapter), a 

bidder’s disclosure obligation pursuant 

to paragraph (b) of this section need be 

provided only to the extent known after 

making reasonable inquiry. 

3. For purposes of Instruction 1 to 

Item 402(t)(2) of this part: If the 

disclosure is included in a Schedule 

13E–3 (§ 240.13e–100 of this chapter), 

TO (§ 240.14d–100 of this chapter) or 

14D–9 (§ 240.14d–101 of this chapter), 

the disclosure provided by this table 

shall be quantified assuming that the 

triggering event took place on the latest 

practicable date and that the price per 

share of the securities of the subject 

company in a Rule 13e–3 transaction, or 

of the issuer whose securities are the 

subject of the third-party tender offer, is 

the closing market price as of the latest 

practicable date. 

* * * * * 

PART 240—GENERAL RULES AND 

REGULATIONS, SECURITIES 

EXCHANGE ACT OF 1934 

4. The authority citation for Part 240 

is amended by adding authority for 

§ 240.13e–100, § 240.14a–4, § 240.14a– 

6, § 240.14a–8, § 240.14a–21, § 240.14a– 

101, and § 240.14c–101 as follows: 

Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 

77s, 77z–2, 77z–3, 77eee, 77ggg, 77nnn, 

77sss, 77ttt, 78c, 78d, 78e, 78f, 78g, 78i, 78j, 

78j–1, 78k, 78k–1, 78l, 78m, 78n, 78o, 78p, 

78q, 78s, 78u–5, 78w, 78x, 78ll, 78mm, 80a– 

20, 80a–23, 80a–29, 80a–37, 80b–3, 80b–4, 

80b–11, and 7201 et seq., 18 U.S.C. 1350, and 

12 U.S.C. 5221(e)(3), unless otherwise noted. 

* * * * * 

Section 240.13e–100 is also issued sec. 

951, under Pub. L. 111–203, 124 Stat. 1376. 

Section 240.14a–4 is also issued under sec. 

951, Pub. L. 111–203, 124 Stat. 1376. 

Section 240.14a–6 is also issued under sec. 

951, Pub. L. 111–203, 124 Stat. 1376. 

Section 240.14a–8 is also issued under sec. 

951, Pub. L. 111–203, 124 Stat. 1376. 

Section 240.14a–21 is also issued under 

sec. 951, Pub. L. 111–203, 124 Stat. 1376. 

Section 240.14a–101 is also issued under 

sec. 951, Pub. L. 111–203, 124 Stat. 1376. 

Section 240.14c–101 is also issued under 

sec. 951, Pub. L. 111–203, 124 Stat. 1376. 

* * * * * 

5. Amend § 240.13e–100 by revising 

Item 15. 

The revisions read as follows: 

§ 240.13e–100 Schedule 13E–3, 

Transaction statement under section 13(e) 

of the Securities Exchange Act of 1934 and 

Rule 13e–3 (§ 240.13e–3) thereunder. 

* * * * * 

Item 15. Additional Information 

Furnish the information required by 

Item 1011(b) and (c) of Regulation M– 

A (§ 229.1011(b) and (c) of this chapter). 

* * * * * 

6. Amend § 240.14a–4 by: 

(a) adding the phrase ‘‘and votes to 

determine the frequency of shareholder 

votes on executive compensation 

pursuant to § 240.14a–21(b) of this 

chapter’’ at the end of the first sentence 

of paragraph (b)(1); 

(b) adding paragraph (b)(3). 

The addition reads as follows: 

§ 240.14a–4 Requirements as to proxy. 

* * * * * 

(b) * * * 

(3) A form of proxy which provides 

for a shareholder vote on the frequency 

of shareholder votes to approve the 

compensation of executives required by 

section 14A(a)(2) of the Securities 

Exchange Act of 1934 (15 U.S.C. 78n– 

1(a)(2)) shall provide means whereby 

the person solicited is afforded an 

opportunity to specify by boxes a choice 

among 1, 2 or 3 years, or abstain. 

7. Amend § 240.14a–6 by: 

(a) removing ‘‘and/or’’ at the end of 

paragraph (a)(6); 

(b) revising paragraph (a)(7); 

(c) adding paragraph (a)(8). 

The revisions read as follows: 

§ 240.14a–6 Filing requirements. 

(a) * * * 


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(7) A vote to approve the 

compensation of executives as required 

pursuant to section 14A(a)(1) of the 

Securities Exchange Act of 1934 (15 

U.S.C. 78n–1(a)(1)) and § 240.14a–21(a) 

of this chapter, or pursuant to section 

111(e)(1) of the Emergency Economic 

Stabilization Act of 2008 (12 U.S.C. 

5221(e)(1)) and § 240.14a–20 of this 

chapter; and/or 

(8) A vote to determine the frequency 

of shareholder votes to approve the 

compensation of executives as required 

pursuant to Section 14A(a)(2) of the 

Securities Exchange Act of 1934 (15 

U.S.C. 78n–1(a)(2)) and § 240.14a–21(b) 

of this chapter. 

8. Amend § 240.14a–8 by adding Note 

to paragraph (i)(10) to read as follows: 

§ 240.14a–8 Shareholder proposals. 

* * * * * 

(i) * * * 

(10) * * * 

Note to paragraph (i)(10): A company may 

exclude, as substantially implemented, a 

shareholder proposal that would provide an 

advisory vote or seek future advisory votes to 

approve the compensation of executives as 

disclosed pursuant to Item 402 of Regulation 

S–K (§ 229.402 of this chapter) or any 

successor to Item 402 (a ‘‘say-on-pay’’ vote) or 

that relates to the frequency of say-on-pay 

votes, provided the company has adopted a 

policy on the frequency of say-on-pay votes 

that is consistent with the plurality of votes 

cast in the most recent shareholder vote 

required by § 240.14a–21(b) of this chapter. 

9. Add § 240.14a–21 to read as 

follows: 

§ 240.14a–21 Shareholder approval of 

executive compensation, frequency of 

votes for approval of executive 

compensation and shareholder approval of 

golden parachute compensation. 

(a) If a solicitation is made by a 

registrant and the solicitation relates to 

an annual or other meeting of 

shareholders for which the rules of the 

Commission require executive 

compensation disclosure pursuant to 

Item 402 of Regulation S–K (§ 229.402 of 

this chapter), the registrant shall, for the 

first annual or other meeting of 

shareholders on or after January 21, 

2011 and not less frequently than once 

every 3 years thereafter, include a 

separate resolution subject to 

shareholder advisory vote to approve 

the compensation of its named 

executive officers, as disclosed pursuant 

to Item 402 of Regulation S–K. 

(b) If a solicitation is made by a 

registrant and the solicitation relates to 

an annual or other meeting of 

shareholders for which the rules of the 

Commission require executive 

compensation disclosure pursuant to 

Item 402 of Regulation S–K (§ 229.402 of 

this chapter), the registrant shall, for the 

first annual or other meeting of 

shareholders on or after January 21, 

2011 and not less frequently than once 

every 6 years thereafter, include a 

separate resolution subject to 

shareholder advisory vote as to whether 

the shareholder vote required by 

paragraph (a) of this section should 

occur every 1, 2 or 3 years. Registrants 

required to provide a separate 

shareholder vote pursuant to § 240.14a– 

20 of this chapter shall include the 

separate resolution required by this 

section for the first annual or other 

meeting of shareholders after the 

registrant has repaid all obligations 

arising from financial assistance 

provided under the TARP, as defined in 

section 3(8) of the Emergency Economic 

Stabilization Act of 2008 (12 U.S.C. 

5202(8)), and not less frequently than 

once every 6 years thereafter. 

(c) If a solicitation is made by a 

registrant for a meeting of shareholders 

at which shareholders are asked to 

approve an acquisition, merger, 

consolidation or proposed sale or other 

disposition of all or substantially all the 

assets of the registrant, the registrant 

shall provide a separate shareholder 

vote to approve any agreements or 

understandings and compensation 

disclosed pursuant to Item 402(t) of 

Regulation S–K (§ 229.402(t) of this 

chapter), unless such agreements or 

understandings have been subject to a 

shareholder advisory vote under 

paragraph (a) of this section. Consistent 

with section 14A(b) of the Exchange Act 

(15 U.S.C. 78n–1(b)), any agreements or 

understandings between an acquiring 

company and the named executive 

officers of the registrant, where the 

registrant is not the acquiring company, 

are not required to be subject to the 

separate shareholder advisory vote 

under this paragraph. 

Instructions to § 240.14a–21 

1. Disclosure relating to the 

compensation of directors required by 

Item 402(k) and Item 402(r) of 

Regulation S–K (§ 229.402(r) of this 

chapter) is not subject to the 

shareholder vote required by paragraph 

(a) of this section. If a registrant 

includes disclosure pursuant to Item 

402(s) of Regulation S–K (§ 229.402(s) of 

this chapter) about the registrant’s 

compensation policies and practices as 

they relate to risk management and risktaking incentives, these policies and 

practices would not be subject to the 

shareholder vote required by paragraph 

(a) of this section. To the extent that risk 

considerations are a material aspect of 

the registrant’s compensation policies or 

decisions for named executive officers, 

the registrant is required to discuss 

them as part of its Compensation 

Discussion and Analysis under 

§ 229.402(b) of this chapter, and 

therefore such disclosure would be 

considered by shareholders when voting 

on executive compensation. 

2. If a registrant includes disclosure of 

golden parachute compensation 

arrangements pursuant to Item 402(t) 

(§ 229.402(t) of this chapter) in an 

annual meeting proxy statement, such 

disclosure would be subject to the 

shareholder vote required by paragraph 

(a) of this section. 

3. Registrants that are smaller 

reporting companies entitled to provide 

scaled disclosure in accordance with 

Item 402(l) of Regulation S–K 

(§ 229.402(l) of this chapter) are not 

required to include a Compensation 

Discussion and Analysis in their proxy 

statements in order to comply with this 

section. For smaller reporting 

companies, the vote required by 

paragraph (a) of this section must be to 

approve the compensation of the named 

executive officers as disclosed pursuant 

to Item 402(m) through (q) of Regulation 

S–K (§ 229.402(m) through (q) of this 

chapter). 

10. Amend § 240.14a–101 by: 

(a) removing the dash that appears 

before paragraph (a) of Item 5 and 

adding in its place an open parenthesis; 

(b) adding paragraph (a)(5) of Item 5; 

(c) adding paragraph (b)(3) of Item 5; 

(d) adding Item 24. 

The revisions read as follows: 

§ 240.14a–101 Schedule 14A. Information 

required in proxy statement. 

Schedule 14A Information 

* * * * * 

Item 5. Interest of Certain Persons in 

Matters To Be Acted Upon. 

(a) * * * 

(5) If the solicitation is made on 

behalf of the registrant, furnish the 

information required by Item 402(t) of 

Regulation S–K (§ 229.402(t) of this 

chapter). 

* * * * * 

(b) * * * 

(3) If the solicitation is made on 

behalf of the registrant, furnish the 

information required by Item 402(t) of 

Regulation S–K (§ 229.402(t) of this 

chapter). 

* * * * * 

Item 24. Shareholder Approval of 

Executive Compensation. Registrants 

required to provide any of the separate 

shareholder votes pursuant to 

§ 240.14a–21 of this chapter shall 

disclose that they are providing each 

such vote as required pursuant to 

section 14A of the Securities Exchange 


jlentini on DSKJ8SOYB1PROD with PROPOSALS3
Federal Register / Vol. 75, No. 208 / Thursday, October 28, 2010 / Proposed Rules 66619 

Act (15 U.S.C. 78n–1), and briefly 

explain the general effect of each vote, 

such as whether each such vote is nonbinding. 

11. Amend § 240.14c–101 by adding 

paragraph (c) of Item 3. 

The revisions read as follows: 

§ 240.14c–101 Schedule 14C. Information 

required in information statement. 

Schedule 14C Information 

* * * * * 

Item 3. * * * 

(c) Furnish the information required 

by Item 402(t) of Regulation S–K 

(§ 229.402(t) of this chapter). 

12. Amend § 240.14d–101 by revising 

Item 8 to add the words ‘‘and (c)’’ after 

‘‘Item 1011(b)’’. 

PART 249—FORMS, SECURITIES 

EXCHANGE ACT OF 1934 

13. The authority citation for part 249 

is amended by adding authority for 

§ 308a and § 310 to read as follows: 

Authority: 15 U.S.C. 78a et seq. and 7201 

et seq.; and 18 U.S.C. 1350, unless otherwise 

noted. 

* * * * * 

Section 249.308a is also issued under sec. 

951, Pub. L. 111–203, 124 Stat. 1376. 

Section 249.310 is also issued under sec. 

951, Pub. L. 111–203, 124 Stat. 1376. 

* * * * * 

14. Amend Form 10–Q (referenced in 

§ 249.308a) by adding paragraph (c) to 

Item 5 in Part II to read as follows: 

Note: The text of Form 10–Q does not, and 

this amendment will not, appear in the Code 

of Federal Regulations. 

Form 10–Q 

* * * * * 

Part II—Other Information 

* * * * * 

Item 5. Other Information 

* * * * * 

(c) If an annual or other meeting of 

shareholders relating to the election of 

directors has occurred during the period 

covered by this report at which 

shareholders voted on the frequency of 

shareholder votes on the compensation 

of executives as required by section 14A 

of the Securities Exchange Act of 1934 

(15 U.S.C. 78n–1), disclose the 

company’s decision in light of such vote 

as to how frequently the company will 

include a shareholder vote on the 

compensation of executives for the six 

years subsequent to such meeting. 

15. Amend Form 10–K (referenced in 

§ 249.310) by adding a second sentence 

to Item 9B in Part II to read as follows: 

Note: The text of Form 10–K does not, and 

this amendment will not, appear in the Code 

of Federal Regulations. 

Form 10–K 

* * * * * 

Part II—Other Information 

* * * * * 

Item 9B. Other Information 

(a) * * * If an annual or other 

meeting of shareholders relating to the 

election of directors has occurred during 

the fourth fiscal quarter in the period 

covered by this report at which 

shareholders voted on the frequency of 

shareholder votes on the compensation 

of executives as required by section 14A 

of the Securities Exchange Act of 1934 

(15 U.S.C. 78n–1), disclose the 

company’s decision in light of such vote 

as to how frequently the company will 

include a shareholder vote on the 

compensation of executives for the six 

years subsequent to such meeting. 

* * * * * 

Dated: October 18, 2010. 

By the Commission. 

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. 2010–26535 Filed 10–27–10; 8:45 am] 

BILLING CODE 8011–01–P 


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