I 

111TH CONGRESS 

1ST SESSION H. R. 3272 

To amend the Securities Exchange Act of 1934 to add requirements for 

board of directors committees regarding risk management and compensation policies, to require non-binding shareholder votes on executive compensation, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

JULY 21, 2009 

Mr. ELLISON introduced the following bill; which was referred to the 

Committee on Financial Services 

A BILL 

To amend the Securities Exchange Act of 1934 to add requirements for board of directors committees regarding 

risk management and compensation policies, to require 

non-binding shareholder votes on executive compensation, 

and for other purposes. 

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

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Corporate Governance 

5 Reform Act of 2009’’. 


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1 SEC. 2. INDEPENDENCE OF CHAIRMAN OF THE BOARD. 

2 The Securities Exchange Act of 1934 (15 U.S.C. 78a 

3 et seq.) is amended by inserting after section 10A the fol4 lowing new section: 

5 ‘‘SEC. 10B. INDEPENDENCE OF CHAIRMAN OF THE BOARD. 

6 ‘‘(a) INDEPENDENCE REQUIREMENT.—The chair7 man of the board of directors of an issuer shall be inde8 pendent. 

9 ‘‘(b) PROHIBITION ON SERVICE AS EXECUTIVE OFFI10 CER.—An individual may not serve as an executive officer 

11 of an issuer while serving as the chairman of the board 

12 of directors of such issuer.’’. 

13 SEC. 3. RISK MANAGEMENT COMMITTEE. 

14 (a) IN GENERAL.—The Securities Exchange Act of 

15 1934 (15 U.S.C. 78a et seq.), as amended, is further 

16 amended by inserting after section 10B the following new 

17 section: 

18 ‘‘SEC. 10C. RISK MANAGEMENT. 

19 ‘‘(a) RISK MANAGEMENT COMMITTEE.— 

20 ‘‘(1) INDEPENDENCE REQUIRED.—Each mem21 ber of the risk management committee of an issuer 

22 shall be independent. 

23 ‘‘(2) DUTIES.—The risk management com24 mittee of an issuer shall periodically review the risk 

25 management policies of the issuer. 


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1 ‘‘(b) CHIEF RISK OFFICER.—Each issuer shall have 

2 a chief risk officer who shall— 

3 ‘‘(1) establish, evaluate, and enforce the risk 

4 management policies and procedures of the issuer; 

5 and 

6 ‘‘(2) report directly to the risk management 

7 committee.’’. 

8 (b) DEFINITION.—Section 3(a) of the Securities Ex9 change Act (15 U.S.C. 78c(a)) is amended by adding at 

10 the end the following: 

11 ‘‘(65) RISK MANAGEMENT COMMITTEE.—The 

12 term ‘risk management committee’ means— 

13 ‘‘(A) a committee (or equivalent body) es14 tablished by and amongst the board of directors 

15 of an issuer for the purpose of overseeing the 

16 risk management policies and procedures of the 

17 issuer; and 

18 ‘‘(B) if no such committee exists with re19 spect to an issuer, the entire board of directors 

20 of the issuer.’’. 

21 SEC. 4. COMPENSATION COMMITTEE. 

22 (a) IN GENERAL.—The Securities Exchange Act of 

23 1934 (15 U.S.C. 78a et seq.), as amended, is further 

24 amended by inserting after section 10C the following new 

25 section: 


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1 ‘‘SEC. 10D. COMPENSATION COMMITTEE. 

2 ‘‘(a) INDEPENDENCE REQUIRED.—Each member of 

3 the compensation committee of an issuer shall be inde4 pendent. 

5 ‘‘(b) DUTIES.—The compensation committee of an 

6 issuer shall periodically review all compensation practices 

7 and structures of the issuer.’’. 

8 (b) DEFINITION.—Section 3(a) of the Securities Ex9 change Act (15 U.S.C. 78c(a)), as amended, is further 

10 amended by adding at the end the following: 

11 ‘‘(66) COMPENSATION COMMITTEE.—The term 

12 ‘compensation committee’ means— 

13 ‘‘(A) a committee (or equivalent body) es14 tablished by and amongst the board of directors 

15 of an issuer for the purpose of overseeing and 

16 reviewing the compensation provided by the 

17 issuer to the executives and employees of the 

18 issuer; and 

19 ‘‘(B) if no such committee exists with re20 spect to an issuer, the entire board of directors 

21 of the issuer.’’. 

22 SEC. 5. SHAREHOLDER VOTE ON EXECUTIVE COMPENSA23 TION. 

24 The Securities Exchange Act of 1934 (15 U.S.C. 78a 

25 et seq.) is amended by inserting after section 14 the fol26 lowing new section: 


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1 ‘‘SEC. 14A. ANNUAL SHAREHOLDER APPROVAL OF EXECU2 TIVE COMPENSATION. 

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

4 proxy or consent or authorization for an annual or other 

5 meeting for which the proxy solicitation rules of the Com6 mission require compensation disclosure of the share7 holders occurring after the end of the 1-year period begin8 ning on the date of enactment of this subsection, shall in9 clude a separate resolution subject to shareholder vote to 

10 approve the compensation of executives as disclosed pursu11 ant to the compensation disclosure rules of the Commis12 sion (which disclosure shall include the compensation dis13 cussion and analysis, the compensation tables, and any re14 lated material). 

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

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

17 the board of directors and shall not be construed— 

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

19 ‘‘(2) to create or imply any change to the cur20 rent fiduciary duties of such board; 

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

22 duty by such board; or 

23 ‘‘(4) to restrict or limit the ability of share24 holders to make proposals for inclusion in such 

25 proxy materials related to executive compensation.’’. 


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1 SEC. 6. STUDY ON DIRECTOR CERTIFICATION. 

2 (a) STUDY REQUIRED.—The Securities and Ex3 change Commission shall carry out a study on the feasi4 bility of requiring, and the logistics of implementing, a cer5 tification process under which an individual seeking to be6 come a member of the board of directors of an issuer 

7 would have to first be certified by the Securities and Ex8 change Commission as having the experience and expertise 

9 necessary to carry out the functions of a member of the 

10 board of directors of such issuer. 

11 (b) REPORT.—Not later than the end of the 1-year 

12 period beginning on the date of the enactment of this Act, 

13 the Securities and Exchange Commission shall submit a 

14 report to the Committee on Financial Services of the 

15 House of Representatives and the Committee on Banking, 

16 Housing, and Urban Affairs of the Senate containing the 

17 conclusions of the study required under subsection (a). 

18 SEC. 7. REGULATIONS AND PROHIBITION ON LISTING FOR 

19 NON-COMPLIANCE. 

20 Not later than the end of the 6-month period begin21 ning on the date of the enactment of this Act, the Securi22 ties and Exchange Commission shall— 

23 (1) issue regulations to carry out the amend24 ments made by this Act; and 

25 (2) by rule, direct the national securities ex26 changes and national securities associations to proVerDate Nov 24 2008 04:24 Jul 22, 2009 Jkt 079200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H3272.IH H3272

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1 hibit the listing of any security of an issuer that is 

2 not in compliance with the requirements of any por3 tion of sections 10B, 10C, or 10D of the Securities 

4 Exchange Act of 1934. 

5 SEC. 8. EFFECTIVE DATE. 

6 The amendments made by this Act shall take effect 

7 with respect to issuers after the end of the 1-year period 

8 beginning on the date of the enactment of this Act. 

Æ 


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