Document ID: SEC-2011-0149-0001
Agency: sec
Document Type: Rule
Title: Shareholder Approval of Executive Compensation and Golden Parachute Compensation
Posted Date: 2011-02-02T05:00Z

[Federal Register Volume 76, Number 22 (Wednesday, February 2, 2011)]
[Rules and Regulations]
[Pages 6010-6047]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-1971]

[[Page 6009]]

Vol. 76

Wednesday,

No. 22

February 2, 2011

Part V

Securities and Exchange Commission

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17 CFR 229, 240, and 249

Shareholder Approval of Executive Compensation and Golden Parachute 
Compensation; Final Rule

  Federal Register / Vol. 76, No. 22 / Wednesday, February 2, 2011 / 
Rules and Regulations  

[[Page 6010]]

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SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 229, 240 and 249

[Release Nos. 33-9178; 34-63768; File No. S7-31-10]
RIN 3235-AK68

Shareholder Approval of Executive Compensation and Golden 
Parachute Compensation

AGENCY: Securities and Exchange Commission.

ACTION: Final rule.

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SUMMARY: We are adopting 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: Effective Date: April 4, 2011.
    Compliance Date: April 4, 2011, except that issuers must comply 
with Exchange Act Section 14A(b) and Rule 14a-21(c) and the amendments 
to Item 5 of Schedule 14A, Item 3 of Schedule 14C, Item 1011 of 
Regulation M-A, Item 11 of Schedule TO, Item 15 of Schedule 13E-3, and 
Item 8 of Schedule 14D-9 for initial preliminary proxy and information 
statements, Schedules TO, 13E-3, and 14D-9 and Forms S-4 and F-4 filed 
on or after April 25, 2011.
    Companies that qualify as ``smaller reporting companies'' (as 
defined in 17 CFR 240.12b-2) as of January 21, 2011, including newly 
public companies that qualify as smaller reporting companies after 
January 21, 2011, will not be subject to Exchange Act Section 14A(a) 
and Rule 14a-21(a) and (b) until the first annual or other meeting of 
shareholders at which directors will be elected and for which the rules 
of the Commission require executive compensation disclosure pursuant to 
Item 402 of Regulation S-K (17 CFR 229.402) occurring on or after 
January 21, 2013.

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 adopting 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 of Schedule 14A \4\ and amendments to Item 3 of 
Schedule 14C \5\ under the Securities Exchange Act of 1934 (``Exchange 
Act'').\6\ We are also adopting 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 11 of Schedule 
TO,\13\ and amendments to Item 5.07 of Form 8-K.\14\
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    \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 240.14d-100.
    \14\ 17 CFR 249.308.
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Table of Contents

I. Background and Summary
II. Discussion of the Amendments
    A. Shareholder Approval of Executive Compensation
    1. Rule 14a-21(a)
    a. Proposed Rule
    b. Comments on the Proposed Rule
    c. Final Rule
    2. Item 24 of Schedule 14A
    a. Proposed Amendments
    b. Comments on the Proposed Amendments
    c. Final Rule
    3. Amendments to Item 402(b) of Regulation S-K
    a. Proposed Amendments
    b. Comments on the Proposed Amendments
    c. Final Rule
    B. Shareholder Approval of the Frequency of Shareholder Votes on 
Executive Compensation
    1. Rule 14a-21(b)
    a. Proposed Rule
    b. Comments on the Proposed Rule
    c. Final Rule
    2. Item 24 of Schedule 14A
    a. Proposed Amendments
    b. Comments on the Proposed Amendments
    c. Final Rule
    3. Amendment to Rule 14a-4
    a. Proposed Amendments
    b. Comments on the Proposed Amendments
    c. Final Rule
    4. Amendment to Rule 14a-8
    a. Proposed Amendments
    b. Comments on the Proposed Amendments
    c. Final Rule
    5. Amendment to Form 8-K
    a. Proposed Amendments
    b. Comments on the Proposed Amendments
    c. Final Rule
    6. Effect of Shareholder Vote
    C. Issues Relating to Both Shareholder Votes Required by Section 
14A(a)
    1. Amendments to Rule 14a-6
    a. Proposed Amendments
    b. Comments on the Proposed Amendments
    c. Final Rule
    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. Item 402(t) of Regulation S-K
    a. Proposed Amendments
    b. Comments on the Proposed Amendments
    i. General Comments on the Proposed Item 402(t) Table
    ii. Comments on the Elements of Compensation and Presentation of 
the Proposed Item 402(t) Table
    iii. Comments on Individuals Subject to Item 402(t) Disclosure
    iv. Comments on Item 402(t) Disclosure in Annual Meeting Proxy 
Statements
    c. Final Rule
    i. Item 402(t) Table and Narrative Requirements
    ii. Elements of Compensation and Presentation of Item 402(t) 
Table
    iii. Individuals Subject to Item 402(t) Disclosure
    iv. Item 402(t) Disclosure in Annual Meeting Proxy Statements
    3. Amendments to Schedule 14A, Schedule 14C, Schedule 14D-9, 
Schedule 13E-3, Schedule TO, and Item 1011 of Regulation M-A
    a. Proposed Amendments
    b. Comments on the Proposed Amendments
    c. Final Rule
    4. Rule 14a-21(c)
    a. Proposed Rule
    b. Comments on the Proposed Rule
    c. Final Rule
    i. Scope of Rule 14a-21(c) Shareholder Advisory Vote
    ii. Exceptions to Rule 14a-21(c) Shareholder Advisory Vote
    E. Treatment of Smaller Reporting Companies

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    F. Transition Matters
III. Paperwork Reduction Act
    A. Background
    B. Summary of the Final Rules
    C. Summary of Comment Letters and Revisions to Proposals
    D. Revisions to PRA Reporting and Cost Burden Estimates
IV. Cost-Benefit Analysis
    A. Introduction
    B. Comments on the Cost-Benefit Analysis
    C. Benefits
    D. Costs
V. Consideration of Impact on the Economy, Burden on Competition, 
and Promotion of Efficiency, Competition, and Capital Formation
VI. Final Regulatory Flexibility Act Analysis
    A. Reasons for, and Objectives of, the Proposed Action
    B. Legal Basis
    C. Significant Issues Raised by Public Comments
    D. Small Entities Subject to the Final Amendments
    E. Reporting, Recordkeeping, and Other Compliance Requirements
    F. Duplicative, Overlapping, or Conflicting Federal Rules
    G. Significant Alternatives
VII. Statutory Authority and Text of the Amendments

I. Background and Summary

    On October 18, 2010, we proposed a number of amendments to our 
rules relating to the shareholder approval of executive compensation 
and golden parachute compensation.\15\ We proposed these rules to 
implement Section 951 of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act (the ``Act'').\16\ As discussed in detail below, we have 
taken into consideration the comments received on the proposed 
amendments and are adopting several amendments to our rules.\17\
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    \15\ See Release No. 33-9153 (October 18, 2010) [75 FR 66590] 
(the ``Proposing Release'').
    \16\ Public Law 111-203 (July 21, 2010).
    \17\ The public comments we received on the Proposing Release 
are available on our Web site at http://www.sec.gov/comments/s7-31-10/s73110.shtml. In addition, to facilitate public input on the Act, 
the Commission provided a series of e-mail links, organized by 
topic, on its Web site at http://www.sec.gov/spotlight/regreformcomments.shtml. The public comments we received on Section 
951 of the Act are available on our Web site at http://www.sec.gov/comments/df-title-ix/executive-compensation/executive-compensation.shtml.
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    The Act 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 solicitation rules of 
the Commission require compensation disclosure shall include a separate 
resolution subject to shareholder vote to approve the compensation of 
executives,'' \18\ 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.'' \19\
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    \18\ Exchange 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. As noted in the Proposing Release, 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, 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.
    \19\ Exchange Act Section 14A(c).
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    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 whether [the say-
on-pay vote] 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\
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    \20\ Exchange Act Section 14A(a)(2).
    \21\ Exchange Act Section 14A(c).
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    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 
shareholder 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 say-on-pay 
vote 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\
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    \22\ Exchange Act Section 14A(b)(1).
    \23\ Exchange Act Section 14A(b)(1).
    \24\ Exchange Act Section 14A(b)(2).
    \25\ Exchange Act Section 14A(b)(2).
    \26\ Exchange Act Section 14A(c).
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    In addition to their non-binding status, none of the shareholder 
votes required pursuant to Section 14A 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\ Further, 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 also provides that ``the Commission 
may, by rule or order, exempt an issuer or class of issuers'' from the 
shareholder

[[Page 6012]]

advisory votes required by Section 14A.\31\ In determining whether to 
make an exemption, the Commission is directed to take into account, 
among other considerations, whether the requirements of Section 14A(a) 
and (b) disproportionately burden small issuers.\32\
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    \27\ Exchange Act Section 14A(c)(1).
    \28\ Exchange Act Section 14A(c)(2).
    \29\ Exchange Act Section 14A(c)(3).
    \30\ Exchange 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 were proposed 
in a separate rulemaking. See Reporting of Proxy Votes on Executive 
Compensation and Other Matters, Release No. 34-63123 (Oct. 18, 2010) 
[75 FR 66622].
    \31\ Exchange Act Section 14A(e).
    \32\ Exchange Act Section 14A(e).
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    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.\33\ 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 statement that is required to include executive compensation 
disclosure pursuant to Item 402 of Regulation S-K, 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 in this release are in effect 
by that time.\34\
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    \33\ Exchange Act Section 14A(a)(3).
    \34\ See Section II.E below for a discussion of a temporary 
exemption for smaller reporting companies.
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    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 to be ``in 
accordance with regulations to be promulgated by the Commission,'' \35\ 
the golden parachute compensation arrangements disclosure under 
proposed new Item 402(t) and a separate resolution to approve golden 
parachute compensation arrangements pursuant to Rule 14a-21(c) will 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). The rule amendments we adopt today with respect to new Rule 
14a-21(c) and the amendments to the disclosure requirements in Item 5 
of Schedule 14A, Item 3 of Schedule 14C, Item 1011 of Regulation M-A, 
Item 11 of Schedule TO, Item 15 of Schedule 13E-3, and Item 8 of 
Schedule 14D-9, are effective for initial filings on or after April 25, 
2011.
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    \35\ Exchange Act Section 14A(b)(1).
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    We received over 60 comment letters in response to the proposed 
amendments. In addition, we received over a dozen letters relating to 
Section 951 of the Act.\36\ These letters came from corporations, 
pension funds, professional associations, trade unions, law firms, 
consultants, academics, individual investors, and other interested 
parties. In general, the commentators supported the proposed amendments 
that would implement Section 951 of the Act. Some commentators, 
however, opposed some of the proposed amendments and suggested 
modifications or alternatives to the proposals.
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    \36\ These comment letters were received prior to publication of 
the Proposing Release. See note 17 above.
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    We have reviewed and considered all of the comments that we 
received relating to the proposed amendments. The adopted rules reflect 
changes made in response to many of these comments. We discuss our 
revisions with respect to each proposed rule amendment in more detail 
throughout this release.
    We are adopting 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 certain extraordinary 
business transactions. We are also adopting a new Item 24 of Schedule 
14A to provide disclosure regarding the effect of the shareholder votes 
required by Rule 14a-21, such as whether each vote is non-binding. In 
addition, our 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 will require additional disclosure regarding golden 
parachute arrangements in connection with certain extraordinary 
business transactions, Rule 13e-3 \37\ going-private transactions and 
tender offers.
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    \37\ 17 CFR 240.13e-3.
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    We are also adopting amendments to Item 402 of Regulation S-K to 
require disclosure of an issuer's consideration of the say-on-pay vote 
in its Compensation Discussion and Analysis, and to prescribe 
disclosure about golden parachute compensation arrangements in new Item 
402(t). In addition, we are adopting an instruction to Rule 14a-8 to 
clarify the treatment of shareholder proposals relating to the 
shareholder advisory votes required by Rule 14a-21. Finally, we are 
adopting amendments to Form 8-K to facilitate disclosure of the results 
of the shareholder advisory vote on the frequency of say-on-pay votes, 
and to require disclosure about whether and how the issuer will 
implement the results of the shareholder advisory vote on the frequency 
of say-on-pay votes.

II. Discussion of the Amendments

A. Shareholder Approval of Executive Compensation

1. Rule 14a-21(a)
    Proposed Rule 14a-21(a) would require issuers,\38\ not less 
frequently than once every three years, to include in their proxy 
statements a separate shareholder advisory vote to approve the 
compensation of executives. We are adopting the rule substantially as 
proposed with some changes in response to comments.
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    \38\ Our rules as adopted 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. Foreign private 
issuers, as defined in Rule 3b-4(c) [17 CFR 240.3b-4(c)], are not 
required under Section 14A or the rules we are adopting today to 
conduct a shareholder advisory vote on executive compensation nor a 
shareholder advisory vote on the frequency of such votes.
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a. Proposed Rule
    Under our proposed rule, an issuer 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 its named executive officers, as defined in Item 
402(a)(3) \39\ of Regulation S-K. Rule 14a-21(a), as proposed, 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, the first day 
after the end of the 6-month period beginning on the date of enactment 
of the Act.
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    \39\ 17 CFR 229.402(a)(3).
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    In accordance with Section 14A(a)(1), shareholders would vote to 
approve the compensation of the issuer's named

[[Page 6013]]

executive officers, as such compensation is disclosed pursuant to Item 
402 \40\ 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. We also 
proposed an instruction to Rule 14a-21 to specify that the rule 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.
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    \40\ We proposed that 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). Such disclosure under Item 402(t), 
however, would not be required to be included in annual meeting 
proxy statements.
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b. Comments on the Proposed Rule
    Commentators were generally supportive of the proposal. Many 
commentators agreed with the approach, as proposed, not to designate 
specific language to be used or require issuers to frame the 
shareholder vote to approve executive compensation in the form of a 
standard resolution.\41\ Some commentators indicated that issuers 
should have flexibility in drafting the resolution.\42\ Commentators 
noted that flexibility would permit issuers to tailor the resolution to 
the issuer's individual circumstances.\43\ Others stated that we should 
designate specific language for the resolution \44\ or at least 
establish clear, minimum guidelines,\45\ principles-based 
guidelines,\46\ or model language,\47\ while other commentators 
suggested we include language for a resolution in the form of non-
exclusive examples \48\ or a safe harbor.\49\ Commentators indicated 
that it would be helpful to have an example of resolution language that 
would comply with the rule \50\ and that sample language would simplify 
the drafting process for issuers and promote efficiency.\51\
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    \41\ See, e.g., letters from American Federation of State, 
County and Municipal Employees (``AFSCME''), Center on Executive 
Compensation (``Center on Exec. Comp.''), Compensia (``Compensia''), 
Davis Polk & Wardwell LLP (``Davis Polk''), the Financial Services 
Roundtable (``FSR''), Pfizer Inc. (``Pfizer''), Protective Life 
Corporation (``Protective Life''), and United Brotherhood of 
Carpenters (``UBC'').
    \42\ See, e.g., letters from Business Roundtable (``Business 
Roundtable'') and Towers Watson (``Towers Watson'').
    \43\ See letter from Business Roundtable.
    \44\ See, e.g., letters from National Association of Corporate 
Directors (``NACD''), PGGM Investments (``PGGM''), Public Citizen 
(``Public Citizen''), and WorldatWork (``WorldatWork'').
    \45\ See, e.g., letters from Boston Common Asset Management 
(``Boston Common''), First Affirmative Financial Network, LLC 
(``First Affirmative''), Glass Lewis & Co. (``Glass Lewis''), Social 
Investment Forum (``Social Investment''), and Walden Asset 
Management (``Walden'').
    \46\ See, e.g., letters from International Corporate Governance 
Network (``ICGN'') and Teachers Insurance and Annuities Association 
of America and College Retirement Equities Fund (``TIAA-CREF'').
    \47\ See, e.g., letter from Calvert Group, Ltd. (``Calvert'').
    \48\ See, e.g., letters from Society of Corporate Secretaries 
and Governance Professionals (``Society of Corp. Sec.'') and 
Sullivan & Cromwell LLP (``Sullivan'').
    \49\ See, e.g., letters from The Boeing Company (``Boeing'') and 
Pearl Meyer & Partners (``PM&P'').
    \50\ See letter from Society of Corp. Sec.
    \51\ See letter from Sullivan.
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    Many commentators agreed with our proposed approach not to exempt 
smaller reporting companies from Rule 14a-21(a) and Exchange Act 
Section 14A(a)(1).\52\ Some commentators did suggest that smaller 
reporting companies should be exempt from the say-on-pay vote \53\ or 
required to conduct a say-on-pay vote on a triennial basis beginning in 
2013.\54\
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    \52\ See, e.g., letters from California Public Employees 
Retirement System (``CalPERS''), Council of Institutional Investors 
(``CII''), Glass Lewis, ICGN, PGGM, and the State Board of 
Administration of Florida (``SBA of Florida'').
    \53\ See, e.g., letters from NACD and UBC.
    \54\ See letter from the Committee on Federal Regulation of 
Securities, Section of Business Law of the American Bar Association 
(``ABA'').
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    Some commentators suggested that we clarify the relationship 
between the federally created right and state law voting rights.\55\ 
Most commentators, however, indicated there was no need for the 
Commission to adopt rules as to which shares are entitled to vote.\56\ 
One commentator asserted that the issue as to which shares are entitled 
to vote is traditionally a state law matter that we do not need to 
address in our rulemaking.\57\
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    \55\ See, e.g., letter from the ABA.
    \56\ See, e.g., letters from Business Roundtable, FSR, Pfizer, 
PGGM, and Protective Life.
    \57\ See letter from Business Roundtable.
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c. Final Rule
    After considering the comments, we are adopting Rule 14a-21(a) 
substantially as proposed with some modifications. Under the final 
rule, issuers will 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 their named executive 
officers, as defined in Item 402(a)(3) of Regulation S-K. Rule 14a-
21(a) specifies 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. We have modified the proposal to clarify in the rule that the 
shareholder vote on executive compensation required by Exchange Act 
Section 14A(a)(1) and Rule 14a-21(a) is required with respect to an 
annual meeting of shareholders at which proxies will be solicited for 
the election of directors, or a special meeting in lieu of such annual 
meeting.\58\ In addition, we have modified the rule to clarify that a 
say-on-pay vote is required at least once every three calendar years. 
Commentators expressed the view that as proposed, the rule would have 
required a say-on-pay vote within three years of the date of the most 
recent say-on-pay vote, which in some cases could have required a say-
on-pay vote more frequently than once every three calendar years.\59\
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    \58\ See the discussion in Note 18 above.
    \59\ See letter from ABA.
---------------------------------------------------------------------------

    As adopted, Rule 14a-21(a) requires a separate shareholder vote to 
approve the compensation of executives for the first annual or other 
meeting of shareholders occurring on or after January 21, 2011, the 
first day after the end of the 6-month period beginning on the date of 
enactment of the Act. 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 pursuant to 
Item 402 \60\ of Regulation S-K, including the CD&A, the compensation 
tables and other narrative executive compensation disclosures required 
by Item 402.\61\ We have included an instruction to 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 will not be required to provide a CD&A in order to comply 
with Rule 14a-21. We understand that smaller reporting companies may 
wish to include supplemental disclosure to facilitate shareholder 
understanding of

[[Page 6014]]

their compensation arrangements in connection with say-on-pay 
votes.\62\ We do not believe, however, that this possibility supports 
exempting smaller reporting companies from the say-on-pay votes. As 
more fully discussed in Section II.E below, in order to ease compliance 
burdens for smaller reporting companies, we are adopting a two-year 
temporary exemption before these companies are required to conduct a 
shareholder advisory vote to approve executive compensation to permit 
these companies additional time to prepare for the new shareholder 
advisory votes.
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    \60\ If disclosure of golden parachute compensation arrangements 
pursuant to 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). Such 
disclosure under Item 402(t), however, is not required to be 
included in all annual meeting proxy statements.
    \61\ While 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).
    \62\ See letter from Society of Corp. Sec., which notes that 
smaller reporting companies may ``feel compelled to include CD&A to 
provide additional disclosure so as to reduce the potential for an 
unfavorable shareholder vote.''
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    As noted in the Proposing Release, consistent with Section 14A, the 
compensation of directors, as disclosed pursuant to Item 402(k) \63\ or 
Item 402(r) \64\ is not subject to the shareholder advisory vote. In 
addition, if an issuer includes disclosure pursuant to Item 402(s) \65\ 
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 will 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,\66\ and therefore such disclosure would be considered by 
shareholders when voting on executive compensation.
---------------------------------------------------------------------------

    \63\ 17 CFR 229.402(k).
    \64\ 17 CFR 229.402(r).
    \65\ 17 CFR 229.402(s).
    \66\ See Proxy Disclosure Enhancements, Release No. 33-9089 
(Dec. 16, 2009) [74 FR 68334] at note 38.
---------------------------------------------------------------------------

    Though we have considered the views of commentators that prescribed 
language would be helpful, the final rule does not require issuers to 
use any specific language or form of resolution to be voted on by 
shareholders. This is consistent with the approach taken by the 
Commission in adopting Rule 14a-20 to implement the shareholder 
advisory vote on executive compensation for companies subject to the 
Emergency Economic Stabilization Act of 2008, or EESA. We believe that 
issuers should retain flexibility to craft the resolution language. As 
we noted in the Proposing Release, however, the shareholder advisory 
vote must relate to all executive compensation disclosure disclosed 
pursuant to Item 402 of Regulation S-K. Section 14A(a)(1) of the 
Exchange Act requires that the shareholder advisory vote must be ``to 
approve the compensation of executives, as disclosed pursuant to [Item 
402 of Regulation S-K] or any successor thereto.'' \67\ We have added 
an instruction to Rule 14a-21(a) to indicate that this language from 
Section 14A(a)(1) should be included in an issuer's resolution for the 
say-on-pay vote and to provide a non-exclusive example of a resolution 
that would satisfy the applicable requirements.\68\ 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 final Rule 14a-21(a). We note that issuers are 
not limited to the required shareholder advisory vote under Rule 14a-
21(a) and may solicit shareholder votes on a range of compensation 
matters to obtain more specific feedback on the issuer's compensation 
policies and programs.
---------------------------------------------------------------------------

    \67\ Exchange Act Section 14A(a)(1).
    \68\ Instruction to Rule 14a-21(a) provides the following non-
exclusive example that would satisfy Rule 14a-21(a): ``RESOLVED, 
that the compensation paid to the company's named executive 
officers, as disclosed pursuant to Item 402 of Regulation S-K, 
including the Compensation Discussion and Analysis, compensation 
tables and narrative discussion, is hereby APPROVED.''
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2. Item 24 to Schedule 14A
    We proposed a new Item 24 to Schedule 14A, to require disclosure in 
any proxy statement in which an issuer is providing a separate 
shareholder vote on executive compensation to briefly explain the 
general effect of the vote, such as whether the vote is non-binding. We 
are adopting this amendment to Schedule 14A as proposed with some 
modifications.
a. Proposed Amendments
    Pursuant to proposed new Item 24 of Schedule 14A, 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 non-binding.\69\ This 
was similar to the approach taken by the Commission in connection with 
disclosure requirements about the shareholder vote on executive 
compensation for companies subject to the EESA.\70\
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    \69\ Section 14A(a) does not require additional disclosure with 
respect to the non-binding nature of the vote. We proposed to 
require additional disclosure so that information about the advisory 
nature of the vote is available to shareholders before they vote. We 
continue to believe this information should be available to 
shareholders.
    \70\ See Item 20 of Schedule 14A; TARP Adopting Release, supra 
note 18, at 75 FR 2790.
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b. Comments on the Proposed Amendments
    Commentators were generally supportive of proposed Item 24 of 
Schedule 14A. We requested comment regarding whether any additional 
disclosures should be provided by issuers that would be useful to 
shareholders. Two commentators indicated that we should amend the 
proposal to require disclosure of the results of previous votes on 
executive compensation.\71\ Another commentator suggested that we 
should remove the reference to the ``general effect'' of the vote as it 
would lead to boilerplate disclosure and remove the word ``whether'' 
from the rule given the non-binding nature of the vote.\72\
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    \71\ See letters from ICGN and PGGM.
    \72\ See letter from ABA.
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c. Final Rule
    After considering the comments, we are adopting Item 24 to Schedule 
14A as proposed with some modifications.\73\ Though we agree that the 
disclosure of previous results would be useful to shareholders, these 
results are required to be disclosed pursuant to Item 5.07 of Form 8-K 
immediately following the votes. Consequently, we do not believe it is 
necessary to mandate such disclosure in Item 24 of Schedule 14A. As 
discussed below, we have modified the proposal to require disclosure of 
the current frequency of say-on-pay votes and to require disclosure of 
when the next say-on-pay vote will occur.
---------------------------------------------------------------------------

    \73\ See discussion of the modification to the proposed Item 24 
relating to the frequency of say-on-pay votes below at Section 
II.B.2.c.
---------------------------------------------------------------------------

    Item 24 is consistent with the approach taken by the Commission in 
Item 20 of Schedule 14A in connection with disclosure requirements 
about the shareholder advisory vote on executive compensation for 
companies subject to EESA. Based on our experience with these votes, we 
believe that such requirements will lead to disclosure of useful 
information about the nature and effect of the vote for shareholders to 
consider, such as whether the vote is non-binding. We note that 
although not required, issuers may choose to provide additional 
disclosure in their proxy materials.
3. Amendments to Item 402(b) of Regulation S-K
    Item 402 requires the disclosure of executive compensation and 
includes

[[Page 6015]]

requirements prescribing narrative and tabular disclosure, as well as 
separate scaled disclosure requirements for smaller reporting 
companies.\74\ Item 402(b) \75\ contains the requirement for CD&A, 
which 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 
principles-based, in that it identifies the disclosure concept and 
provides several non-exclusive 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.\76\ 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.
---------------------------------------------------------------------------

    \74\ 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)).
    \75\ 17 CFR 229.402(b).
    \76\ These mandatory principles-based topics require the company 
to disclose the objectives of the company's compensation programs; 
what the compensation program is designed to reward; each element of 
compensation; why the company chooses to pay each element; how the 
company determines the amount (and, where applicable, the formula) 
for each element; and how each element and the company's decisions 
regarding that element fit into the company's overall compensation 
objectives and affect decisions regarding other elements.
---------------------------------------------------------------------------

    In connection with our implementation of Section 14A(a)(1), we 
proposed amendments to require disclosure in CD&A regarding how issuers 
have considered the results of previous say-on-pay votes required by 
Section 14A and Rule 14a-20.\77\ After reviewing comments on this 
proposal, we are adopting amendments to Item 402(b)(1) as proposed, 
with some modifications in response to concerns raised by commentators.
---------------------------------------------------------------------------

    \77\ 17 CFR 240.14a-20. Pursuant to the EESA, 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.
---------------------------------------------------------------------------

a. Proposed Amendments
    We proposed to amend Item 402(b)(1) to add to the mandatory CD&A 
topics whether, and if so, how an issuer has considered the results of 
previous shareholder votes on executive compensation required by 
Section 14A or Rule 14a-20 in determining compensation policies and 
decisions and, if so, how that consideration has affected its 
compensation policies and decisions. We did not propose to add a 
specific requirement for smaller reporting companies to provide 
disclosure about how previous votes pursuant to Section 14A or Rule 
14a-20 affected compensation policies and decisions because in our view 
such information would not be as valuable outside the context of a 
complete CD&A covering the full range of matters required to be 
addressed by Item 402(b), which smaller reporting companies are not 
required to provide.
b. Comments on the Proposed Amendments
    Comments on the proposal were mixed. Several commentators expressed 
support for an amendment to Item 402(b)(1) to require that issuers 
discuss the results of the shareholder vote and its effect, if any, on 
executive compensation decisions and policies.\78\ Many of these 
commentators agreed with the proposal that discussion of say-on-pay 
vote results in CD&A should be mandatory,\79\ in some cases noting that 
this would provide shareholders a better understanding of how the board 
of directors considered the results of shareholder advisory votes \80\ 
and encourage a dialogue between issuers and shareholders on the topic 
of compensation.\81\ Commentators also indicated that a mandatory 
discussion of the consideration of say-on-pay votes will aid 
transparency of issuers' disclosures on compensation \82\ and will help 
investors better understand compensation decisions made by issuers.\83\
---------------------------------------------------------------------------

    \78\ See, e.g., letters from CalPERS, Calvert, CII, Colorado 
Public Employees' Retirement Association (``COPERA''), ICGN, 
Meridian Compensation Partners (``Meridian''), PGGM, Pensions 
Investment Research Consultants (``PIRC''), SBA of Florida, 
Sullivan, and TIAA-CREF.
    \79\ See, e.g., letters from CalPERS, Calvert, CII, PGGM, PIRC, 
SBA of Florida, and TIAA-CREF.
    \80\ See letter from CalPERS.
    \81\ See letter from TIAA-CREF.
    \82\ See letter from PIRC.
    \83\ See letter from SBA of Florida.
---------------------------------------------------------------------------

    A number of commentators stated that it would be more appropriate 
instead to include consideration of say-on-pay votes among the non-
exclusive examples of the kind of information that should be addressed 
in CD&A, only if material given the issuer's individual facts and 
circumstances \84\ because this approach would avoid boilerplate 
disclosure and require discussion only when material,\85\ and that 
discussion on a mandatory basis may lead to awkward and non-substantive 
disclosure if the issuer has not made changes to its compensation 
program in response to the shareholder vote.\86\
---------------------------------------------------------------------------

    \84\ See, e.g., letters from ABA, Boeing, Business Roundtable, 
Eaton Corporation (``Eaton''), FSR, PM&P, Sullivan, and UnitedHealth 
Group (``UnitedHealth'').
    \85\ See, e.g., letter from UnitedHealth.
    \86\ See letter from PM&P.
---------------------------------------------------------------------------

    Other commentators stated that no amendment to CD&A is required 
\87\ because the Act does not require additional CD&A disclosure and it 
should not be required by rule,\88\ the proposed amendment would add 
length to CD&A without providing meaningful information to 
shareholders,\89\ and the amendment would deem the consideration of 
say-on-pay votes material whether such consideration is material or 
not.\90\ Similarly a number of commentators who asserted that amending 
Item 402(b) is not required also expressed the view that if the 
Commission does adopt an amendment, such CD&A disclosure should be 
required only if material under the issuer's individual facts and 
circumstances.\91\
---------------------------------------------------------------------------

    \87\ See, e.g., letters from Center on Exec. Comp., Compensia, 
Davis Polk, Pfizer, Society of Corp. Sec., and UBC.
    \88\ See, e.g., letter from Center on Exec. Comp.
    \89\ See letter from Davis Polk.
    \90\ See, e.g., letter from Society of Corp. Sec.
    \91\ See, e.g., letters from Compensia, Davis Polk, and Society 
of Corp. Sec.
---------------------------------------------------------------------------

    Commentators also disagreed with respect to which say-on-pay votes 
should be covered by the CD&A discussion. Some favored only the most 
recent say-on-pay vote,\92\ indicating that mandating discussion of 
prior votes would result in extraneous discussion \93\ and little 
benefit.\94\ Other commentators indicated that prior votes should also 
be required to be addressed.\95\ These commentators noted that such 
disclosure of prior votes is appropriate given the long-term process of 
determining compensation \96\ and that it would permit investors to 
evaluate any trends in the results of say-on-pay votes.\97\ One 
commentator stated that if CD&A disclosure with respect to say-on-pay 
votes is mandatory, it should be limited to the most recent vote, but 
if not mandatory should not be so limited.\98\ Although there was 
little response to our request for comment regarding whether smaller 
reporting companies should be required to disclose their consideration 
of

[[Page 6016]]

shareholder advisory votes on executive compensation, one commentator 
stated that our existing disclosure requirements for these companies 
are sufficient.\99\
---------------------------------------------------------------------------

    \92\ See, e.g., letters from ABA, Boeing, Eaton, FSR, 
McGuireWoods (``McGuireWoods''), Meridian, NACD, Pfizer, Protective 
Life, and Sullivan.
    \93\ See letter from Sullivan.
    \94\ See letter from McGuireWoods.
    \95\ See, e.g., letters from Chris Barnard (``Barnard''), 
Calvert, PGGM, PIRC, PM&P, and SBA of Florida.
    \96\ See, e.g., letter from PGGM.
    \97\ See, e.g., letter from SBA of Florida.
    \98\ See letter from Boeing.
    \99\ See letter from ICGN.
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c. Final Rule
    After considering the comments, we are adopting amendments to the 
disclosure requirements of Item 402(b)(1) substantially as proposed, 
with a modification to clarify that this mandatory topic relates to the 
issuer's consideration of the most recent say-on-pay vote. As discussed 
below, issuers should address their consideration of the results of 
earlier say-on-pay votes, to the extent material.
    The final rule amends Item 402(b)(1) 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 the most recent 
shareholder advisory vote on executive compensation. Although it is not 
mandated by Section 951 of the Act, we continue to believe that 
including this mandatory topic in CD&A will facilitate better investor 
understanding of issuers' compensation decisions. Because the 
shareholder advisory vote will apply to all issuers, 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. We expect that this 
variation will be reflected in the CD&A disclosures.
    Following consideration of the comments received, we have decided 
to limit the mandatory topic to whether, and if so, how the issuer has 
considered the results of the most recent say-on-pay vote in 
determining compensation policies and decisions, and if so, how that 
consideration has affected the issuer's executive compensation policies 
and decisions.\100\ This modification reflects that, in making voting 
and investment decisions, shareholders will benefit from understanding 
what consideration the issuer has given to the most recent say-on-pay 
vote. Limiting the mandatory topic to the most recent shareholder vote 
should also focus the disclosure so there should not be lengthy 
boilerplate discussions of all previous votes. Although we have added 
issuer consideration of the most recent say-on-pay vote to the 
mandatory topics, we believe that, consistent with the principles-based 
nature of CD&A, issuers should address their consideration of the 
results of earlier say-on-pay votes to the extent such consideration is 
material to the compensation policies and decisions discussed.
---------------------------------------------------------------------------

    \100\ Reporting companies are currently required to disclose, 
pursuant to Item 5.07 of Form 8-K [17 CFR 249.208a], the preliminary 
results of a shareholder vote within four business days after the 
end of the meeting at which the vote is held and final voting 
results within four business days after the final voting results are 
known. We are adopting amendments to require additional disclosure 
on Form 8-K regarding the company's determination of the frequency 
of say-on-pay votes. See Section II.B.5 below.
---------------------------------------------------------------------------

    Because companies with outstanding indebtedness under the TARP will 
continue to have an annual say-on-pay vote until they repay all such 
indebtedness, these votes should be addressed by issuers in CD&A as 
well. To reflect our treatment of companies subject to EESA with 
outstanding obligations under TARP, we have also modified the amendment 
to Item 402(b)(1) as adopted to address issuer consideration of the 
results of the most recent shareholder advisory vote on executive 
compensation required by Section 14A or Rule 14a-20. This reflects that 
the vote required pursuant to the EESA and 14a-20 is effectively the 
same vote that would be required under Section 14A(a)(1).\101\
---------------------------------------------------------------------------

    \101\ The treatment of companies subject to EESA with 
outstanding obligations under TARP is discussed in Section II.C.3 
below.
---------------------------------------------------------------------------

    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 adding 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 addressed by Item 402(b). However, we note that pursuant 
to Item 402(o) of Regulation S-K, \102\ 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 say-on-pay votes 
is such a factor for a particular issuer, disclosure would be required 
pursuant to Item 402(o).
---------------------------------------------------------------------------

    \102\ 17 CFR 229.402(o).
---------------------------------------------------------------------------

B. Shareholder Approval of the Frequency of Shareholder Votes on 
Executive Compensation

1. Rule 14a-21(b)
    We proposed Rule 14a-21(b) pursuant to which issuers would be 
required, not less frequently than once every six years, to provide a 
separate shareholder advisory vote in proxy statements to determine the 
frequency of the shareholder vote on the compensation of executives 
required by Section 14A(a)(1). We are adopting this amendment 
substantially as proposed with slight modifications in response to 
comments.
a. Proposed Rule
    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.'' \103\ As 
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 for an annual 
or other meeting of shareholders for which our rules require 
compensation disclosure. Consistent with Section 14A, 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.
---------------------------------------------------------------------------

    \103\ Exchange Act Section 14A(a)(2).
---------------------------------------------------------------------------

b. Comments on the Proposed Rule
    Comments on the proposal were generally favorable. Many 
commentators agreed that the rule did not need to specify the required 
language to be used for the shareholder vote on the frequency of 
shareholder votes to approve executive compensation.\104\ Some 
commentators, however, recommended that the Commission should specify 
language or provide non-exclusive examples of resolutions so issuers 
would know how the requirement may be satisfied.\105\ A number of 
commentators also requested that the Commission clarify whether the 
vote should be presented in the form of a resolution given that 
shareholders will have a choice among three frequencies

[[Page 6017]]

or abstaining from the frequency vote.\106\ Although some commentators 
suggested that we specify which shares are entitled to vote in the 
shareholder vote on the frequency of say-on-pay votes,\107\ most 
commentators indicated there was no need for the Commission to address 
this question.\108\
---------------------------------------------------------------------------

    \104\ See, e.g., letters from AFSCME, Business Roundtable, FSR, 
Protective Life, and Towers Watson.
    \105\ See, e.g., letters from Boeing, Pfizer, PGGM, Society of 
Corp. Sec., and Sullivan.
    \106\ See, e.g., letters from ABA, Pfizer, Society of Corp. 
Sec., and Sullivan.
    \107\ See, e.g., letter from the ABA.
    \108\ See, e.g., letters from Business Roundtable, FSR, Pfizer, 
PGGM, and Protective Life.
---------------------------------------------------------------------------

    We also requested comment regarding whether a new issuer should be 
permitted to disclose the frequency of its say-on-pay votes in the 
registration statement for its initial public offering and be exempted 
from conducting say-on-pay votes and frequency votes at its annual 
meetings until the annual meeting for the year disclosed in its 
registration statement. Most commentators indicated that newly public 
companies should not be exempt from the say-on-pay and frequency votes 
and should be required to conduct say-on-pay and frequency votes at 
their first annual shareholders meeting after the initial public 
offering.\109\ However, some commentators expressed support for such an 
exemption as it would provide these issuers additional time to 
formulate their compensation policies as a public company before 
conducting the shareholder votes required by Section 14A.\110\
---------------------------------------------------------------------------

    \109\ See, e.g., letters from AFSCME, CII, CalPERS, ICGN, Georg 
Merkl (``Merkl''), Public Citizen, and RAILPEN Investments and 
Universities Superannuation Scheme (``RAILPEN & USS'').
    \110\ See, e.g., letters from ABA, Compensia, Davis Polk, NACD, 
and Sullivan.
---------------------------------------------------------------------------

c. Final Rule
    After reviewing and considering the comments, we are adopting Rule 
14a-21(b) as proposed with slight modifications to clarify that the 
frequency vote is required at least once during the six calendar years 
following the prior frequency vote.\111\ Under Rule 14a-21(b), issuers 
will be required, not less frequently than once every six calendar 
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.'' \112\ After considering and 
reviewing comments on the proposed rule, we do not believe it is 
necessary to provide a form of resolution for the vote required by Rule 
14a-21(b). In response to concerns raised by commentators and discussed 
below, we are also adopting a temporary exemption under which smaller 
reporting companies will not be required to conduct a shareholder 
advisory vote on the frequency of say-on-pay votes until meetings on or 
after January 21, 2013.\113\
---------------------------------------------------------------------------

    \111\ As proposed, Rule 14a-21(b) would have required a 
frequency vote within the six-year period from the date of the most 
recent frequency vote.
    \112\ Exchange Act Section 14A(a)(2).
    \113\ See discussion in Section II.E below.
---------------------------------------------------------------------------

    Rule 14a-21(b) will also clarify that the separate shareholder vote 
on the frequency of shareholder votes on executive compensation will be 
required only in a proxy statement for an annual or other meeting of 
shareholders at which directors will be elected and that such vote is 
required only once every six calendar years. Under Rule 14a-21(b), 
issuers will 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. After 
reviewing the comment letters, we continue to believe that the say-on-
pay vote and the frequency vote should be required of newly public 
companies in the proxy statement for such company's first annual 
meeting after the initial public offering. This will give shareholders 
the opportunity to express a view on these matters while the company is 
in the process of establishing policies that will apply as a public 
company and could benefit from understanding its shareholders' point of 
view.
2. Item 24 of Schedule 14A
    In order to implement the requirements of Section 14A(a), we 
proposed new Item 24 to Schedule 14A, to briefly explain the general 
effect of the frequency vote, such as whether the vote is non-binding. 
We are adopting this amendment to Schedule 14A as proposed with a 
modification.
a. Proposed Amendments
    In addition to disclosure regarding the vote on executive 
compensation, we proposed that 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. Proposed Item 24 of Schedule 14A would also 
require issuers to briefly explain the general effect of this vote, 
such as whether the vote is non-binding.
b. Comments on the Proposed Amendments
    Commentators generally supported proposed Item 24 of Schedule 14A 
as it relates to the frequency of say-on-pay votes.\114\ One 
commentator expressed the view that the proposed amendment is not 
needed as it will lead to boilerplate disclosure.\115\ Some 
commentators also suggested that issuers should be required to disclose 
the current frequency of say-on-pay votes.\116\
---------------------------------------------------------------------------

    \114\ See, e.g., letters from CalPERS, ICGN, PGGM, and 
Protective Life.
    \115\ See letter from Society of Corp. Sec.
    \116\ See, e.g., letters from ICGN and TIAA-CREF.
---------------------------------------------------------------------------

c. Final Rule
    After reviewing and considering the comments, we are adopting Item 
24 of Schedule 14A as proposed with a modification. Issuers will be 
required to disclose in the proxy statement that they are providing a 
separate shareholder advisory vote on the frequency of say-on-pay 
votes. Item 24 of Schedule 14A will also require issuers to briefly 
explain the general effect of this vote, such as whether the vote is 
non-binding.\117\ As noted above, this is similar to the approach taken 
by the Commission in connection with disclosure requirements about the 
shareholder advisory vote on executive compensation for companies 
subject to EESA.\118\ Based on our experience with these votes, we 
believe that such requirements will lead to useful disclosure of 
information about the nature and effect of the vote for shareholders to 
consider, such as whether the vote is non-binding.
---------------------------------------------------------------------------

    \117\ As discussed in Section II.A.2.a, Section 14A(a) does not 
require additional disclosure with respect to the non-binding nature 
of the vote. We are requiring additional disclosure so that 
information about the advisory nature of the vote is available to 
shareholders before they vote.
    \118\ See Section II.A.2.a, above.
---------------------------------------------------------------------------

    After reviewing comments, we are also adding a requirement to Item 
24 for issuers to provide disclosure of the current frequency of say-
on-pay votes and when the next scheduled say-on-pay vote will 
occur,\119\ in their proxy materials. We believe this will provide 
useful information to shareholders about upcoming say-on-pay and 
frequency shareholder advisory votes.
---------------------------------------------------------------------------

    \119\ Issuers should disclose the current frequency as 
determined by the board following a shareholder advisory vote. We 
would not expect disclosure of either the current frequency or when 
the next scheduled say-on-pay vote will occur in proxy materials for 
the meeting where an issuer initially conducts the say-on-pay and 
frequency votes.
---------------------------------------------------------------------------

3. Amendment to Rule 14a-4
    In order to implement the requirements of Section 14A(a)(2), we 
also proposed amendments to Rule 14a-4. After considering comments, we 
are adopting the amendments to Rule 14a-4 as proposed, with slight 
modification.

[[Page 6018]]

a. Proposed Amendments
    As noted in the Proposing Release, 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 noted in the Proposing Release that 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 executive 
compensation.\120\ 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 
proposed 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.\121\
---------------------------------------------------------------------------

    \120\ See Section II.B.3 of the Proposing Release.
    \121\ Because 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.
---------------------------------------------------------------------------

    Specifically, we proposed 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. Absent 
amendment, Rule 14a-4 requires the form of proxy 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.\122\ We proposed amendments to revise this standard to 
permit proxy cards to reflect the choice of 1, 2, or 3 years, or 
abstain, for these votes.
---------------------------------------------------------------------------

    \122\ Rule 14a-4(b)(1).
---------------------------------------------------------------------------

b. Comments on the Proposed Amendments
    Comments on the proposal were generally favorable. Many 
commentators expressed support for the proposed approach where 
shareholders are given four choices on the frequency vote.\123\ Some 
commentators suggested alternative approaches including a vote where 
shareholders would rank each choice of frequency or vote separately for 
each of 1, 2, and 3 years,\124\ a vote where management would choose 1, 
2, or 3 years as the frequency and ask shareholders to approve or 
disapprove its choice,\125\ and a two-step approach whereby 
shareholders would first vote whether or not they have a preference as 
to the frequency of say-on-pay votes and, if they do have a preference, 
subsequently vote on whether such votes should be conducted every 1, 2, 
or 3 years.\126\
---------------------------------------------------------------------------

    \123\ See, e.g., letters from Calvert, COPERA, ICGN, Meridian, 
Merkl, PGGM, and Protective Life.
    \124\ See letter from Keith P. Bishop (``Bishop'').
    \125\ See letter from UBC.
    \126\ See letter from Society of Corp. Sec.
---------------------------------------------------------------------------

    In addition, we requested comment in the Proposing Release as to 
whether issuers, brokers, transfer agents, and data processing firms 
would be able to accommodate the four choices for a single line item on 
the proxy card. Commentators indicated that they would be ready for the 
vote with four choices on the proxy card by January 21, 2011.\127\ One 
commentator recommended that we clarify that issuers may vote 
uninstructed shares in accordance with management's recommendations so 
long as they follow the requirements of Rule 14a-4,\128\ while another 
suggested that the Commission extend the transition guidance permitting 
the presentation of three choices for the frequency vote for the entire 
2011 proxy season and perhaps require the three-choice approach for all 
issuers for 2011 to allow for uniformity among different issuers.\129\
---------------------------------------------------------------------------

    \127\ See, e.g., letters from Broadridge Financial Solutions, 
Inc. (``Broadridge'') and Proxytrust (``Proxytrust'').
    \128\ See letter from Sullivan.
    \129\ See letter from ABA. For a discussion of transition 
matters, see Section II.F below.
---------------------------------------------------------------------------

c. Final Rule
    After considering the comments, we are adopting the rule 
substantially as proposed with some modifications. Specifically, we are 
adopting 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. Absent an amendment, 
Rule 14a-4 would not permit proxy cards to reflect the choice of 1, 2, 
or 3 years, or abstain. The amendments revise the rule to permit proxy 
cards to reflect the choice of 1, 2, or 3 years, or abstain, for the 
frequency vote.
    In response to comment, we note that issuers may vote uninstructed 
proxy cards in accordance with management's recommendation for the 
frequency vote only if the issuer follows the existing requirements of 
Rule 14a-4 to (1) include a recommendation for the frequency of say-on-
pay votes in the proxy statement, (2) permit abstention on the proxy 
card, and (3) include language regarding how uninstructed shares will 
be voted in bold on the proxy card.
4. Amendment to Rule 14a-8
    In connection with implementing the requirements of Section 
14A(a)(2), we also proposed a note to Rule 14a-8(i)(10) relating to 
shareholder proposals. After considering the comments, we are adopting 
the amendment to Rule 14a-8 with some modifications.
a. Proposed Amendments
    Our proposed amendment to Rule 14a-8 under the Exchange Act would 
add a note to Rule 14a-8(i)(10) to 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.\130\ One of the substantive bases for 
exclusion, Rule 14a-8(i)(10), provides that an issuer

[[Page 6019]]

may exclude a shareholder proposal that has already been substantially 
implemented.
---------------------------------------------------------------------------

    \130\ These substantive bases for exclusion are set forth in 
Rule 14a-8(i).
---------------------------------------------------------------------------

    We proposed adding a 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). 
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 proposed, an issuer 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).
b. Comments on the Proposed Amendments
    Comments on the proposal were mixed. Many commentators supported 
the proposed amendment to permit exclusion of shareholder proposals on 
frequency and say-on-pay,\131\ stating that the amendment would 
eliminate redundancy and reduce administrative burdens and costs.\132\ 
Other commentators disagreed with the general approach,\133\ stating 
that they believe it would be unwise as a matter of public policy and 
would inappropriately interpret substantial implementation because the 
note would permit exclusion of proposals requesting a frequency that 
the issuer has not implemented.\134\ Other commentators asserted that 
an amendment is not required because issuers should be permitted to 
exclude any shareholder proposals on frequency as long as the issuer 
complies with Section 14A(a)(2).\135\ Some commentators suggested that 
we should also permit issuers to exclude shareholder proposals on the 
frequency of say-on-pay votes when they adopt a policy to hold say-on-
pay votes more frequently than the frequency that is consistent with 
the plurality of votes cast in the most recent shareholder vote \136\ 
to prevent issuers being penalized for providing shareholders with more 
frequent say-on-pay votes.\137\ Other commentators felt that issuers 
should not be required to adopt a particular policy on the frequency of 
say-on-pay votes in order to be permitted to exclude shareholder 
proposals on executive compensation,\138\ noting that an issuer should 
be permitted to exclude shareholder proposals on frequency so long as 
the issuer provides a reasonable basis for the frequency chosen to 
prevent an annual re-visiting of the frequency vote by 
shareholders.\139\
---------------------------------------------------------------------------

    \131\ See, e.g., letters from ABA, Business Roundtable, Center 
for Capital Markets Competitiveness of the U.S. Chamber of Commerce 
(``CCMC''), Eaton, FSR, ICGN, Pfizer, PGGM, and Protective Life.
    \132\ See, e.g., letter from Business Roundtable.
    \133\ See, e.g., letters from AFSCME, Calvert, Center on Exec. 
Comp., CII, Public Citizen, and UBC.
    \134\ See, e.g., letter from AFSCME.
    \135\ See letter from UBC.
    \136\ See, e.g., letters from ABA, Davis Polk, Meridian, Society 
of Corp. Sec., and Sullivan.
    \137\ See letter from Sullivan.
    \138\ See, e.g., letters from Boeing and Center on Exec. Comp.
    \139\ See letter from Boeing.
---------------------------------------------------------------------------

    In addition, some commentators stated that the proposed note to 
Rule 14a-8(i)(10) should incorporate a majority standard rather than 
the proposed plurality standard, so that issuers would need to adopt a 
policy consistent with the majority of votes cast in order to exclude a 
shareholder proposal as substantially implemented,\140\ noting that the 
majority standard would be consistent with policies that boards should 
implement actions recommended by majority shareholder vote.\141\ Some 
commentators also recommended that issuers should be permitted to 
exclude shareholder proposals for votes on executive compensation that 
are narrower in scope \142\ than the say-on-pay vote required under 
Rule 14a-21(a).\143\ These commentators expressed the concern that 
shareholders could undermine the non-binding nature of the frequency 
vote through more specific vote proposals.\144\
---------------------------------------------------------------------------

    \140\ See, e.g., letters from CalPERS, CII, and SBA of Florida.
    \141\ See letter from CII.
    \142\ An example would be a shareholder proposal for an advisory 
vote on the Chief Executive Officer's compensation as disclosed 
under Item 402 of Regulation S-K.
    \143\ See, e.g., letters from Business Roundtable, Boeing, CCMC, 
Davis Polk, Pfizer, and Society of Corp. Sec.
    \144\ See letter from Boeing.
---------------------------------------------------------------------------

    Finally, some commentators indicated that it would be inappropriate 
to permit companies to exclude shareholder proposals on frequency if 
there have been material changes in the company's compensation program 
since the prior frequency vote \145\ because shareholders should be 
permitted the opportunity to revisit their decision on the frequency 
vote under such circumstances.\146\ Other commentators noted that 
material changes to an issuer's compensation program should not limit 
the availability of Rule 14a-8(i)(10) because shareholders will 
understand that a company's compensation program is dynamic and factor 
this into their frequency voting decisions.\147\ These commentators 
noted that the difficulty in determining whether changes are material 
would erode the benefit of the note to Rule 14a-8(i)(10), create 
uncertainty as to a company's ability to exclude shareholder proposals 
on frequency,\148\ and burden the staff with analyzing materiality on a 
case-by-case basis.\149\
---------------------------------------------------------------------------

    \145\ See, e.g., letters from Boston Common, Calvert, First 
Affirmative, ICGN, PIRC, PGGM, RAILPEN & USS, Social Investment, and 
Walden.
    \146\ See letter from RAILPEN & USS.
    \147\ See, e.g., letters from ABA, Boeing, Frederic W. Cook & 
Co., Inc. (``Frederic Cook''), McGuireWoods, Pfizer, PM&P, and 
Protective Life.
    \148\ See letter from McGuireWoods.
    \149\ See letter from Frederic Cook.
---------------------------------------------------------------------------

c. Final Rule
    After reviewing the comments, we are adopting the amendment to Rule 
14a-8(i)(10) with some modifications.
    We continue to believe that under certain conditions, an issuer 
should be permitted to exclude subsequent shareholder proposals that 
seek a vote on the same matters as the shareholder advisory votes on 
say-on-pay and frequency required by Section 14A(a). Consequently, 
consistent with the proposal, we are adding a note to Rule 14a-8(i)(10) 
to permit the exclusion of a shareholder proposal that would provide a 
say-on-pay vote, seeks future say-on-pay votes, or relates to the 
frequency of say-on-pay votes in certain circumstances; however, in 
response to comments,\150\ we are changing the threshold for exclusion 
from a plurality to a majority. Specifically, as adopted, the note to 
Rule 14a-8(i)(10) will permit exclusion of such a shareholder proposal 
if, in the most recent shareholder vote on frequency of say-on-pay 
votes, a single frequency (i.e., one, two or three years) received the 
support of a majority of the votes cast and the issuer has adopted a 
policy on

[[Page 6020]]

the frequency of say-on-pay votes that is consistent with that 
choice.\151\
---------------------------------------------------------------------------

    \150\ See, e.g., letters from CalPERS, CII, and SBA of Florida.
    \151\ For purposes of this analysis, an abstention would not 
count as a vote cast. We are prescribing this voting standard solely 
for purposes of determining the scope of the exclusion under the 
note to 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.
---------------------------------------------------------------------------

    In light of the nature of the vote--with three substantive 
choices--it is possible that no single choice will receive a majority 
of votes and that, as a result, there may be issuers that may not be 
able to exclude subsequent shareholder proposals regarding say-on-pay 
matters even if they adopt a policy on frequency that is consistent 
with plurality of votes cast. We also recognize, however, that if no 
single frequency choice receives the support of a majority of votes 
cast, the choice preferred by the plurality may not represent the 
choice preferred by most of the company's shareholders. For example, if 
30% of votes support annual voting, 30% support biennial voting, and 
40% favor triennial voting, no frequency would have received a majority 
of votes cast; therefore, it is not clear that implementing the 
plurality choice would be favored by most of the company's 
shareholders. In that situation, if the company implemented triennial 
voting and the note to Rule 14a-8(i)(10) allowed exclusion of 
shareholder proposals seeking a different frequency, this could prevent 
shareholders from putting forth proposals that seek to request that the 
company implement a frequency that would be preferred by a majority of 
shareholders. After considering commentators' views, we are concerned 
that this approach would inappropriately restrict shareholder proposals 
on this topic, particularly in light of Section 14A(c)(4)'s directive 
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.''
    On the other hand, if a majority of votes cast favors a given 
frequency and the issuer adopts a policy on frequency that is 
consistent with the choice of the majority of votes, then in our view, 
as a matter of policy it is appropriate for Rule 14a-8 to provide for 
exclusion of subsequent shareholder proposals that would provide a say-
on-pay vote, seek future say-on-pay votes, or relate to the frequency 
of say-on-pay votes. We believe that, in these circumstances, 
additional shareholder proposals on frequency generally would 
unnecessarily burden the company and its shareholders given the 
company's adherence to the view favored by a majority of shareholder 
votes regarding the frequency of say-on-pay votes.\152\ As described 
above, an issuer would not be permitted to exclude such shareholder 
proposals under the note if no frequency choice received a majority of 
the votes cast.
---------------------------------------------------------------------------

    \152\ We recognize that this approach is different from the 
traditional ``substantially implemented'' standard in Rule 14a-
8(i)(10) since the frequency sought by a shareholder would be 
different from the frequency the issuer has implemented. We have 
revised the note to avoid confusion in that regard. A shareholder 
proposal seeking a frequency that is the same as that provided by 
the company would be excludable under the traditional 
``substantially implemented'' standards in Rule 14a-8(i)(10) without 
regard to the new note, assuming there are no other differences that 
would lead to a different result.
---------------------------------------------------------------------------

    As a result of this amendment, an issuer will be permitted to 
exclude shareholder proposals that propose a vote on the frequency of 
such votes,\153\ including those drafted as requests to amend the 
issuer's governing documents. For example, if in the first vote under 
Rule 14a-21(b) a majority of votes were cast for a two-year frequency 
for future shareholder votes on executive compensation, and the issuer 
adopts 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.\154\
---------------------------------------------------------------------------

    \153\ No-action requests to exclude shareholder proposals that 
seek shareholder advisory votes on different aspects of executive 
compensation will be evaluated on a case-by-case basis by the staff.
    \154\ Issuers seeking to exclude a shareholder proposal under 
the note to Rule 14a-8(i)(10) are required to follow the same 
shareholder proposal process with the staff of the Commission as 
would be required if the issuer intended to rely on any other 
substantive basis for exclusion under Rule 14a-8.
---------------------------------------------------------------------------

    We also believe that a shareholder proposal that would provide an 
advisory vote or seek future advisory votes on executive compensation 
with substantially the same scope as the say-on-pay vote required by 
Rule 14a-21(a)--the approval of executive compensation as disclosed 
pursuant to Item 402 of Regulation S-K--should also be subject to 
exclusion under Rule 14a-8(i)(10) if the issuer adopts a policy on 
frequency that is consistent with the majority of votes cast. This is 
consistent with the proposal, although like additional frequency votes, 
the note to Rule 14a-8(i)(10) would condition exclusion on the company 
implementing the frequency favored by a majority of shareholders. In 
this circumstance, shareholders would be provided the opportunity to 
provide say-on-pay votes on the frequency preferred by a majority of 
shareholders when last polled, and we believe additional proposals on 
the same matter would impose unnecessary burdens on companies and 
shareholders.
    We are also modifying the note slightly. To avoid confusion, we are 
removing the requirement that an issuer must provide ``a vote on 
frequency at least as often as required by Section 14A(a)(2).'' We 
believe this language is not necessary as issuers are already required 
to comply with Section 14A(a)(2) in any event. In addition, we are 
removing the language ``as substantially implemented'' from the note to 
avoid confusion.
5. Amendment to Form 8-K
    We also proposed amendments to Form 10-Q and Form 10-K to require 
additional disclosure regarding the issuer's decision to adopt a policy 
on the frequency of say-on-pay votes following a shareholder advisory 
vote on frequency. After considering the comments, we are not adopting 
amendments to Form 10-Q and Form 10-K. Instead, we are adopting a new 
Form 8-K Item to require disclosure of the issuer's decision on the 
frequency of say-on-pay votes.
a. Proposed Amendments
    Issuers are currently required to disclose the preliminary results 
of shareholder votes pursuant to Item 5.07 of Form 8-K within four 
business days following the day the shareholder meeting ends and final 
voting results within four business days of when they are known. This 
item will require issuers to report how shareholders voted in the say-
on-pay vote and the frequency of shareholder votes on executive 
compensation.
    We proposed amendments to Form 10-K and Form 10-Q to require 
additional disclosure regarding the issuer's decision in light of such 
vote as to how frequently the company will include those say-on-pay 
votes for the six subsequent years. Our proposed amendments to Item 9B 
of Form 10-K and new Item 5(c) of Part II of Form 10-Q would have 
required an issuer to disclose this decision in the Form 10-Q covering 
the quarterly period during which the shareholder advisory vote occurs, 
or in the Form 10-K if the shareholder advisory vote occurs during the 
issuer's fourth quarter. In light of the relevance of this decision to 
potential shareholder proposals on the topic, we proposed this 
disclosure to notify shareholders on a timely basis about the issuer's 
decision on how frequently it

[[Page 6021]]

will provide the say-on-pay vote to shareholders.
b. Comments on the Proposed Amendments
    Comments on the proposal were mixed. A number of commentators 
supported the amendments as proposed that would require disclosure of 
an issuer's decision as to the frequency of say-on-pay votes in the 
Form 10-Q or Form 10-K for the period during which the advisory vote 
occurs \155\ as the requirement would allow shareholders to readily 
obtain an issuer's decision on the frequency of say-on-pay votes.\156\ 
Some commentators questioned whether the Commission should require such 
disclosure of an issuer's determination regarding frequency following 
the results of a shareholder advisory vote at all,\157\ given that the 
shareholder vote on the frequency of say-on-pay votes is only 
advisory.\158\ Other commentators suggested that we should allow 
issuers additional time to consider the results of the shareholder vote 
\159\ and to contact shareholders for additional feedback,\160\ 
particularly if the shareholders do not express a clear preference on 
frequency. These commentators recommended that we instead require that 
disclosure about the issuer's decision be included in a later Form 10-Q 
or Form 10-K filing,\161\ Form 8-K filing,\162\ or on the issuer's Web 
site.\163\ These commentators indicated that a requirement for a later 
filing would still permit shareholders adequate time to submit a 
shareholder proposal on the frequency of say-on-pay votes.\164\
---------------------------------------------------------------------------

    \155\ See, e.g., letters from CalPERS, ICGN, Meridian, PGGM, and 
SBA of Florida.
    \156\ See letter from SBA of Florida.
    \157\ See, e.g., letters from Business Roundtable, Boeing, 
Center on Exec. Comp., CCMC, FSR, and Society of Corp. Sec.
    \158\ See, e.g., letter from Society of Corp. Sec.
    \159\ See, e.g., letters from Compensia, Davis Polk, Eaton, 
Frederic Cook, PM&P, and Protective Life.
    \160\ See, e.g., letters from ABA, Boeing, TIAA-CREF, and Time 
Warner Inc. (``Time Warner'').
    \161\ See, e.g., letters from Eaton, Frederic Cook, Compensia, 
and PM&P.
    \162\ See, e.g., letters from ABA and Davis Polk.
    \163\ See letter from Business Roundtable.
    \164\ See letter from ABA.
---------------------------------------------------------------------------

    Commentators also noted that Item 5.07 of Form 8-K currently 
requires disclosure of the number of votes cast ``for, against or 
withheld'' on matters submitted to a vote of shareholders, but that the 
item would not permit disclosure of the results of the frequency vote 
for ``1 year, 2 years, 3 years, or abstain.'' \165\ These commentators 
suggested that we amend Item 5.07 of Form 8-K to facilitate reporting 
the results of the frequency vote.\166\
---------------------------------------------------------------------------

    \165\ See, e.g., letter from Davis Polk.
    \166\ See letter from PIRC.
---------------------------------------------------------------------------

c. Final Rule
    After reviewing the comments on this issue, we have concluded that 
disclosure of the issuer's determination regarding frequency of say-on-
pay votes should be required, but we are adopting the disclosure 
requirement through an amendment to Item 5.07 of Form 8-K in lieu of 
amendments to Form 10-Q and Form 10-K. We have considered the position 
of commentators who were concerned that the required timing of 
disclosure under our proposal would not permit sufficient time for 
issuers to fully consider the results of the vote, including through 
board deliberations and consultation with shareholders as described 
above, before the disclosure of the decision is required.\167\ In light 
of this concern, we are adopting this disclosure requirement as a Form 
8-K requirement due at a later date, in lieu of amending Form 10-Q and 
Form 10-K, to give issuers additional time to make their decisions.
---------------------------------------------------------------------------

    \167\ See, e.g., letters from ABA, Boeing, Compensia, Davis 
Polk, Eaton, Frederic Cook, PM&P, Protective Life, TIAA-CREF, and 
Time Warner.
---------------------------------------------------------------------------

    Under our final rule, Item 5.07 of Form 8-K requires an issuer to 
disclose its decision regarding how frequently it will conduct 
shareholder advisory votes on executive compensation following each 
shareholder vote on the frequency of say-on-pay votes. To comply, an 
issuer will file an amendment to its prior Form 8-K filings under Item 
5.07 that disclose the preliminary and final results of the shareholder 
vote on frequency. This amended Form 8-K will be due no later than 150 
calendar days after the date of the end of the annual or other meeting 
in which the vote required by Rule 14a-21(b) took place, but in no 
event later than 60 calendar days prior to the deadline for the 
submission of shareholder proposals under Rule 14a-8 for the subsequent 
annual meeting, as disclosed in the issuer's proxy materials for the 
meeting at which the frequency vote occurred.\168\ In the amended Item 
5.07 Form 8-K, the issuer must disclose its determination regarding the 
frequency of say-on-pay votes.\169\
---------------------------------------------------------------------------

    \168\ Item 5.07 is not among the list of items subject to the 
safe harbor from liability in Rules 13a-11 [17 CFR 240.13a-11] and 
15d-11 [17 CFR 240.15d-11] under the Exchange Act. In addition, 
companies that fail to file a timely report required by Item 5.07 
will lose their eligibility to file Form S-3 registration 
statements. We are not making a change to this as a result of our 
amendments to Item 5.07. We continue to believe that Item 5.07 does 
not require management to make rapid materiality and similar 
judgments within the compressed Form 8-K timeframe. See Additional 
Form 8-K Disclosure Requirements and Acceleration of Filing Date, 
Release No. 33-8400 (Mar. 16, 2004) [69 FR 15594] at Section II.E 
and Proxy Disclosure Enhancements, Release No. 33-9089 (Dec. 16, 
2009) [74 FR 68334] at Section II.E.
    \169\ Item 5.07(d) of Form 8-K.
---------------------------------------------------------------------------

    We believe the time period specified for filing the amended Item 
5.07 Form 8-K should address commentators' requests that we revise the 
proposal to allow companies additional time to carefully consider the 
results of the frequency vote, including through board and committee 
deliberations and discussions with shareholders, before disclosure of 
the decision is required.\170\ It also should provide enough time for 
shareholders to consider whether to submit a shareholder proposal on 
say-on-pay votes or on the frequency of say-on-pay votes once the 
disclosure is provided.
---------------------------------------------------------------------------

    \170\ In this regard, we note the recent guidance provided by 
the Division of Corporation Finance that Regulation FD [17 CFR 
243.100 et seq.] does not prohibit directors from speaking privately 
with a shareholder or group of shareholders as described in that 
guidance. See Regulation FD CDIs, Question 101.11.
---------------------------------------------------------------------------

    In addition, in response to comment,\171\ we are adopting a 
technical amendment to Item 5.07(b) of Form 8-K to facilitate reporting 
of shareholder votes on frequency. Item 5.07 of Form 8-K generally 
requires an issuer to ``state the number of votes cast for, against, or 
withheld, as well as the number of abstentions and broker non-votes as 
to each such matter * * *.'' The amendments we adopt today will clarify 
that, with respect to the vote on the frequency of say-on-pay votes, 
the issuer will be required to disclose the number of votes cast for 
each of 1 year, 2, years, and 3 years, as well as the number of 
abstentions.\172\
---------------------------------------------------------------------------

    \171\ See, e.g., letters from Davis Polk and PIRC.
    \172\ We are adopting a conforming technical change to 
Instruction 1 to Item 5.07 to carve out Item 5.07(d) from the four-
business day period for reporting the event. See Instruction 1 to 
Item 5.07 of Form 8-K.
---------------------------------------------------------------------------

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 continue to believe this 
shareholder vote, and all shareholder votes required by Section 951 of 
the Act, are intended to be non-binding on the issuer or the issuer's 
board of directors. New Section 14A(c) states that the shareholder 
votes referred to in Section 14A(a) and Section 14A(b) (which includes 
all votes

[[Page 6022]]

under Section 951 of the Act) ``shall not be binding on the issuer or 
the board of directors of an issuer.'' \173\ Though we received a 
comment letter asserting that the shareholder vote on frequency is 
binding,\174\ in our view the plain language of Exchange Act Section 
14A(c) indicates that this vote is advisory. Accordingly, we are 
adopting new Item 24 of Schedule 14A to include language to require 
disclosure regarding the general effect of the shareholder advisory 
votes, such as whether the vote is non-binding.\175\
---------------------------------------------------------------------------

    \173\ Exchange Act Section 14A(c).
    \174\ See letter from Merkl.
    \175\ Even though each of the shareholder advisory votes 
required by Section 14A is non-binding pursuant to the rule of 
construction in Section 14A(c), as we noted in Note 69 of the 
Proposing Release, we believe these votes could play a role in an 
issuer's executive compensation decisions.
---------------------------------------------------------------------------

C. Issues Relating to Both Shareholder Votes Required by Section 14A(a)

1. Amendments to Rule 14a-6
    We proposed amendments to Rule 14a-6 to add the say-on-pay and 
frequency of say-on-pay votes to the list of items that do not require 
the filing of proxy materials in preliminary form. After considering 
comments, we are adopting the proposed amendments to Rule 14a-6, with 
some modification.
a. Proposed Amendments
    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 are 
able to incorporate the staff's comments in their final proxy 
materials. 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 are 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. In the Proposing Release, we 
noted our view that 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.\176\
---------------------------------------------------------------------------

    \176\ See Section II.C.1 of the Proposing Release. See also, 
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].
---------------------------------------------------------------------------

    We proposed amendments to 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.\177\ As proposed, 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 a preliminary 
filing would not otherwise be required under Rule 14a-6(a).
---------------------------------------------------------------------------

    \177\ 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 18, at 75 FR 2791.
---------------------------------------------------------------------------

b. Comments on the Proposed Amendments
    Comments on the proposal were favorable. While one commentator 
stated that say-on-pay votes and votes on the frequency of say-on-pay 
votes should trigger the requirement to file in preliminary form to 
provide the market and investors additional time to consider the 
executive compensation disclosures,\178\ the preponderance of 
commentators agreed that no preliminary proxy should be required.\179\ 
These commentators noted the similarity in proposals for all issuers 
and the likelihood that the administrative burdens would outweigh any 
benefits from a preliminary filing.\180\ In addition, one commentator 
asserted that we should not require a preliminary proxy statement for 
shareholder advisory votes on the frequency of say-on-pay votes that 
are not required by Section 14A so that issuers would not be required 
to file in preliminary form as a result of including a frequency vote 
in their proxy materials voluntarily.\181\ Other commentators suggested 
that no preliminary proxy statement should be required for any separate 
shareholder vote on executive compensation,\182\ noting that it would 
be inappropriate to require a preliminary filing for proposals on more 
narrow aspects of compensation if a preliminary filing is not required 
for broader proposals.\183\
---------------------------------------------------------------------------

    \178\ See letter from Brian Foley (``Foley'').
    \179\ See, e.g., letters from Ameriprise Financial 
(``Ameriprise''), ABA, Business Roundtable, CalPERS, Center on Exec. 
Comp., Compensia, Davis Polk, FSR, ICGN, Pfizer, PGGM, PM&P, 
Protective Life, and Society of Corp. Sec.
    \180\ See, e.g., letter from Compensia.
    \181\ See letter from Business Roundtable.
    \182\ See letters from ABA and ICGN.
    \183\ See letter from ABA.
---------------------------------------------------------------------------

c. Final Rule
    After considering the comments, we are adopting the amendments to 
Rule 14a-6(a) as proposed, with slight modifications. We are adopting 
amendments to Rule 14a-6(a) to add any shareholder advisory vote on 
executive compensation, including shareholder votes to approve 
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. As adopted, a proxy statement 
that includes a solicitation with respect to any advisory vote on 
executive compensation, including a say-on-pay vote or a vote on the 
frequency of say-on-pay 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). Finally, in a revision from the 
proposal, this amendment will also encompass an advisory vote on 
executive compensation, including a vote on the frequency of say-on-pay 
votes, that is not required by Section 14A. Upon review of the 
comments, we are persuaded by commentators' arguments that our 
preliminary proxy filing requirements should not differentiate between 
say-on-pay votes simply because, in one case, the issuer is required to 
include the proposal, and, in the other, the issuer chooses to do so.
2. Broker Discretionary Voting
    As noted in the Proposing Release,\184\ Section 957 of the Act 
amends Section 6(b) of the Exchange Act \185\ to direct the national 
securities exchanges to change their rules to prohibit broker 
discretionary voting of uninstructed shares in certain matters, 
including

[[Page 6023]]

shareholder votes on executive compensation. The national securities 
exchanges have made substantial progress in amending their rules 
regarding broker discretionary voting on executive compensation matters 
to implement this requirement.\186\ Under these amended exchange rules, 
for issuers with a class of securities listed on a national securities 
exchange, broker discretionary voting of uninstructed shares is not 
permitted for a shareholder vote on executive compensation or a 
shareholder vote on the frequency of the shareholder vote on executive 
compensation.\187\
---------------------------------------------------------------------------

    \184\ See Section II.C.2 of the Proposing Release.
    \185\ 15 U.S.C. 78f(b).
    \186\ See, 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); Notice of Filing and Order Granting 
Accelerated Approval of Proposed Rule Change to Prohibit Members 
from Voting Uninstructed Shares on Certain Matters, Release No. 34-
62992, SR-NASDAQ-2010-114 (Sept. 24, 2010).
    \187\ Broker discretionary voting in connection with merger or 
acquisition transactions also is not permitted under rules of the 
national securities exchanges. See, e.g., NYSE Rule 452.
---------------------------------------------------------------------------

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.\188\
---------------------------------------------------------------------------

    \188\ Section 111(e) of the Emergency Economic Stabilization Act 
of 2008, 12 U.S.C. 5221. See also Rule 14a-20.
---------------------------------------------------------------------------

    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), as we indicated in the Proposing Release,\189\ 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 noted in the Proposing Release 
that we would not require an issuer that conducts an annual shareholder 
advisory vote to approve executive compensation pursuant to EESA to 
conduct a separate shareholder advisory vote on executive compensation 
under Section 14A(a)(1) until that issuer has repaid all indebtedness 
under the TARP. Such an issuer would be required to include a separate 
shareholder advisory vote on executive compensation pursuant to Section 
14A(a)(1) and Rule 14a-21(a) for the first annual meeting of 
shareholders after the issuer has repaid all outstanding indebtedness 
under the TARP. Commentators on this issue generally expressed support 
for our proposed approach to companies with outstanding indebtedness 
under TARP,\190\ and we have determined to implement this approach 
under the rules as adopted.
---------------------------------------------------------------------------

    \189\ See Section II.C.3 of the Proposing Release.
    \190\ See, e.g., letters from ABA, CalPERS, COPERA, Davis Polk, 
FSR, PGGM, and RAILPEN & USS.
---------------------------------------------------------------------------

    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, absent exemptive relief 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 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 expressed these views in the Proposing Release \191\ and, as noted 
above, commentators supported our views on this point.
---------------------------------------------------------------------------

    \191\ See Section II.C.3 of the Proposing Release.
---------------------------------------------------------------------------

    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 
continue to believe an exemption by rule is appropriate, pursuant to 
both the exemptive authority granted by Section 14A(e) of the Exchange 
Act \192\ and the Commission's general exemptive authority pursuant to 
Section 36(a)(1) of the Exchange Act.\193\ As a result, Rule 14a-21(b), 
as we are adopting it, exempts an issuer 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), such an issuer 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 Rule 14a-21(b) for the first annual meeting of shareholders after 
the issuer has repaid all outstanding indebtedness under the TARP.
---------------------------------------------------------------------------

    \192\ Exchange 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 adopting 
this 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 
will be subject to the exemption.
    \193\ 15 U.S.C. 78mm(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.''
---------------------------------------------------------------------------

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

[[Page 6024]]

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 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.'' 
\194\
---------------------------------------------------------------------------

    \194\ Exchange Act Section 14A(b)(1).
---------------------------------------------------------------------------

    Under existing Commission rules, a target issuer 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.\195\ In response to this requirement, target issuers often 
include disclosure in their proxy statements about compensation 
arrangements that may be payable to a target issuer's executive 
officers and directors in connection with the transaction. In addition, 
under our existing rules, issuers 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.\196\ The Item 402(j) disclosure 
is provided based on year-end information and various assumptions, and 
generally does not reflect any actual termination or termination 
event.\197\
---------------------------------------------------------------------------

    \195\ Item 5 of Schedule 14A.
    \196\ See 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.
    \197\ See 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.
---------------------------------------------------------------------------

2. Item 402(t) of Regulation S-K
    We proposed Item 402(t) of Regulation S-K to require disclosure of 
named executive officers' golden parachute arrangements in both tabular 
and narrative formats. This disclosure will be required in merger 
proxies and other disclosure documents for similar transactions as 
described in Section II.D.3 below. After considering the comments on 
this proposal, we are adopting Item 402(t) as proposed, with some 
modifications.
a. Proposed Amendments
    We proposed Item 402(t) of Regulation S-K to require disclosure of 
named executive officers' golden parachute arrangements in both tabular 
and narrative formats. We based our proposals on Section 14A(b)(1)'s 
requirement that 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 be ``in a clear and simple form in accordance with 
regulations to be promulgated by the Commission'' and 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.'' \198\
---------------------------------------------------------------------------

    \198\ Exchange Act Section 14A(b)(1).
---------------------------------------------------------------------------

    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 issuer and the named executive officers of the 
target issuer, we proposed that Item 402(t) require disclosure of this 
compensation in addition to the disclosure mandated by Section 
14A(b)(1). Specifically, to cover the full scope of potential golden 
parachute compensation applicable to the transaction, we proposed that 
Item 402(t) require disclosure of all golden parachute compensation 
relating to the merger among the target and acquiring issuers and the 
named executive officers of each.\199\
---------------------------------------------------------------------------

    \199\ 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), we did not propose to subject such agreements 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.
---------------------------------------------------------------------------

    We did not propose to amend the requirements for golden parachutes 
disclosure in annual meeting proxy statements, although, under our 
proposal companies would be permitted to provide disclosure in annual 
meeting proxies in accordance with the new requirement.\200\
---------------------------------------------------------------------------

    \200\ See Sections II.D.2 and II.D.4 below.
---------------------------------------------------------------------------

b. Comments on the Proposed Amendments
    Comments on the proposal were generally favorable. We requested 
comment on a number of aspects of proposed Item 402(t), which we 
describe in more detail below.
i. General Comments on the Proposed Item 402(t) Table
    We proposed that the Item 402(t) table would present quantitative 
disclosure of the individual elements of compensation that a named 
executive officer would receive that are based on or otherwise relate 
to the merger, acquisition, or similar transaction, and the total for 
each named executive officer.
    Many commentators agreed that Item 402(t) as proposed would elicit 
disclosure of all elements of golden parachute compensation ``in a 
clear and simple form'' as required by Section 14A(b)(1).\201\ In 
addition, some commentators suggested that Item 402(t) should be 
clarified to require disclosure of only compensation triggered by the 
subject transaction so that issuers are not required to disclose any 
golden parachute compensation that would not be triggered by the 
subject transaction.\202\
---------------------------------------------------------------------------

    \201\ See, e.g., letters from Davis Polk, PGGM, and WorldatWork.
    \202\ See, e.g., letters from Davis Polk, Society of Corp. Sec., 
and Wachtell.
    \203\ See, e.g., letters from Compensia, Davis Polk, 
McGuireWoods, PM&P, and Sullivan.
---------------------------------------------------------------------------

ii. Comments on the Elements of Compensation and Presentation of the 
Proposed Item 402(t) Table
    As proposed, Item 402(t) would not have any de minimis exceptions 
for compensation below a certain dollar threshold and would not require 
disclosure of previously vested equity and pension benefits. Some 
commentators urged that Item 402(t) should have de minimis exceptions, 
like Item 402(j),\203\ because, in their view, the exclusion of such 
immaterial amounts would not be inconsistent with Section 14A(b)(1)'s 
requirement to

[[Page 6025]]

disclose the total amount of golden parachute compensation.\204\ In 
addition, some commentators asserted that we should amend Item 402(j) 
rather than propose a new Item 402(t).\205\
---------------------------------------------------------------------------

    \204\ See letter from Compensia.
    \205\ See, e.g., letters from Business Roundtable and Meridian.
---------------------------------------------------------------------------

    Most commentators agreed with the proposed approach to omit 
previously vested equity and pension benefits from the table,\206\ as 
including such amounts in the table could lead to confusion by 
overstating the total compensation.\207\ Other commentators, however, 
recommended that such compensation be disclosed in the table \208\ to 
make the compensation disclosure more comprehensive.\209\
---------------------------------------------------------------------------

    \206\ See, e.g., letters from ABA, Center on Exec. Comp., Davis 
Polk, FSR, ICGN, NACD, Pfizer, PM&P, Protective Life, and 
WorldatWork.
    \207\ See letter from ABA.
    \208\ See, e.g., letters from Barnard, Glass Lewis, PGGM, and 
Senator Levin.
    \209\ See, e.g., letter from Glass Lewis.
---------------------------------------------------------------------------

    A number of commentators also requested various other changes to 
the proposed table. Some commentators argued that issuers should have 
more flexibility in drafting the table to fit their individual 
circumstances,\210\ or that issuers should be permitted to 
differentiate between cash severance compensation and cash amounts for 
outstanding awards that have been accelerated.\211\ With respect to 
employment agreements, most commentators supported our proposed 
approach to exclude disclosure of employment agreements from the Item 
402(t) table,\212\ though some commentators argued that such employment 
agreements should be quantified and included in the tabular disclosure 
to provide more comprehensive disclosure.\213\ A number of commentators 
supported the footnote identification of amounts of ``single-trigger'' 
and ``double-trigger'' \214\ compensation elements,\215\ with some 
commentators recommending that the disclosure be included in the main 
text rather than in footnotes if an issuer believes it would be useful 
to the presentation.\216\ One commentator, however, indicated that 
identification of single-trigger and double-trigger elements should not 
be required as it believed this disclosure would not be useful to 
investors.\217\
---------------------------------------------------------------------------

    \210\ See letter from ABA.
    \211\ See letter from Towers Watson.
    \212\ See, e.g., letters from ABA, Center on Exec. Comp., 
Compensia, Davis Polk, Frederic Cook, FSR, Hermes, and PGGM.
    \213\ See, e.g., letters from Glass Lewis, NACD, and PIRC.
    \214\ A ``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-in-control to trigger payment. A ``single-trigger'' 
arrangement does not require such a termination or resignation after 
the change-in-control to trigger payment.
    \215\ See, e.g., letters from CalPERS, CII, FSR, Hermes, ICGN, 
and PGGM.
    \216\ See, e.g., letters from ABA and NACD.
    \217\ See letter from Protective Life.
---------------------------------------------------------------------------

    We also requested comment with respect to the appropriate 
measurement for issuer stock price for tabular disclosure in proxy 
statements for mergers or similar transactions. A number of 
commentators agreed with our proposed approach to calculate such 
amounts based on the issuer's share price as of the latest practicable 
date,\218\ though many other commentators suggested that the share 
price contemplated by the deal should be used, if available,\219\ with 
an alternative to use the average closing price over the first five 
business days following public announcement of the transaction.\220\ 
One commentator expressed a concern that the share price as of the 
latest practicable date could lead to potential gaming of the price by 
issuers.\221\
---------------------------------------------------------------------------

    \218\ See, e.g., letters from ABA, Center on Exec. Comp., and 
ICGN.
    \219\ See, e.g., letters from Davis Polk, PM&P, and Sullivan.
    \220\ See letter from PGGM.
    \221\ See letter from PGGM.
---------------------------------------------------------------------------

iii. Comments on Individuals Subject to Item 402(t) Disclosure
    Some commentators indicated that requiring disclosure under Item 
402(t) of a broader group of individuals than is required by Exchange 
Act Section 14A(b)(1) would be potentially confusing to investors \222\ 
as such disclosure goes beyond the requirements of Section 14A and 
could lead to as many as three separate tables.\223\ Different 
commentators supported disclosure of the broader group of individuals 
\224\ in order to provide the full picture of compensation being 
received in connection with the transaction.\225\
---------------------------------------------------------------------------

    \222\ See, e.g., letters from Center on Exec. Comp., Davis Polk, 
FSR, NACD, Pfizer, PGGM, Protective Life, Towers Watson, Wachtell, 
Lipton, Rosen & Katz (``Wachtell''), and WorldatWork.
    \223\ See letter from Davis Polk.
    \224\ See, e.g., letters from CalPERS, ICGN, PIRC, and Senator 
Carl Levin (``Senator Levin'').
    \225\ See letter from PIRC.
---------------------------------------------------------------------------

    Most commentators supported the proposal that issuers would not be 
required to include 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.\226\ One 
commentator, however, argued that issuers should be permitted to 
include disclosure of the compensation of such individuals to conform 
to the presentation of compensation in prior filings and that we should 
clarify that the named executive officers subject to Item 402(t) is 
determined in the same manner as under Item 5.02(e) of Form 8-K.\227\
---------------------------------------------------------------------------

    \226\ See, e.g., letters from Davis Polk, ICGN, PGGM, and PM&P.
    \227\ See letter from ABA.
---------------------------------------------------------------------------

iv. Comments on Item 402(t) Disclosure in Annual Meeting Proxy 
Statements
    In the Proposing Release, we did not propose requiring Item 402(t) 
disclosure in annual meeting proxy statements. Most commentators agreed 
that the proposed Item 402(t) narrative and tabular disclosure should 
not be required in annual meeting proxy statements \228\ given the 
costs and burdens this would impose on issuers.\229\ However, other 
commentators recommended that such disclosure should be required in 
annual meeting proxy statements,\230\ noting that such information 
plays a key part in shareholder evaluation of an issuer's compensation 
program.\231\
---------------------------------------------------------------------------

    \228\ See, e.g., letters from ABA, Center for Exec. Comp., 
Compensia, Davis Polk, Frederic Cook, FSR, Hermes Equity Ownership 
Services (``Hermes''), ICGN, McGuireWoods, PGGM, PM&P, and 
WorldatWork.
    \229\ See, e.g., letter from Frederic Cook.
    \230\ See, e.g., letters from AFSCME, Protective Life, and 
Public Citizen.
    \231\ See letter from AFSCME.
---------------------------------------------------------------------------

c. Final Rule
    After considering comments, we are adopting Item 402(t) of 
Regulation S-K as proposed, with some modifications, to require 
disclosure of named executive officers' golden parachute arrangements 
in both tabular and narrative formats.
i. Item 402(t) Table and Narrative Requirements
    We are adopting the following new table, as proposed:

[[Page 6026]]

                                                              Golden Parachute Compensation
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                Tax
                  Name                       Cash  ($)      Equity  ($)    Pension/NQDC    Perquisites/    reimbursement    Other  ($)      Total  ($)
                                                                                ($)        benefits  ($)        ($)
(a)                                                  (b)             (c)             (d)             (e)             (f)             (g)             (h)
--------------------------------------------------------------------------------------------------------------------------------------------------------
PEO.....................................  ..............  ..............  ..............  ..............  ..............  ..............  ..............
PFO.....................................  ..............  ..............  ..............  ..............  ..............  ..............  ..............
A.......................................  ..............  ..............  ..............  ..............  ..............  ..............  ..............
B.......................................  ..............  ..............  ..............  ..............  ..............  ..............  ..............
C.......................................  ..............  ..............  ..............  ..............  ..............  ..............  ..............
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    The table presents 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.\232\ As 
proposed and adopted, elements that will be separately quantified and 
included in the total will be any cash severance payment (e.g., base 
salary, bonus, and pro-rata non-equity incentive plan \233\ 
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)). 
Consistent with the proposal, we are adopting 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, will require footnote 
identification of each separate form of compensation reported. The 
final column in the table requires disclosure, for each named executive 
officer, of the aggregate total of all such compensation (column 
(h)).\234\ We are adopting the table as proposed, with a requirement 
for 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.
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    \232\ Item 402(t)(2) of Regulation S-K.
    \233\ As defined in Item 402(a)(6)(iii) of Regulation S-K.
    \234\ Exchange 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.''
---------------------------------------------------------------------------

    As proposed and adopted, the tabular disclosure required by Item 
402(t) requires 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. The table will quantify cash severance, 
equity awards that are accelerated or cashed out, pension and 
nonqualified deferred compensation enhancements, perquisites, and tax 
reimbursements. In addition, the table requires disclosure and 
quantification of the value of any other compensation related to the 
transaction.\235\
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    \235\ Consistent with our proposals, we have adopted 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), Item 402(t) does not permit 
the disclosure of an estimated range of payments.
---------------------------------------------------------------------------

    However, as adopted, Item 402(t) will require tabular and narrative 
disclosure in a proxy statement soliciting shareholder approval of a 
merger or similar transaction or a filing made with respect to a 
similar transaction only of compensation that is based on or otherwise 
relates to the subject transaction.\236\ We agree with commentators 
that it would not be useful to shareholders to require disclosure of 
amounts that would not be paid or payable in connection with the 
transaction subject to shareholder approval.
---------------------------------------------------------------------------

    \236\ Instruction 1 to Item 402(t)(2).
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    To implement the statutory mandate to disclose the conditions upon 
which the compensation may be paid or become payable, as proposed and 
adopted, Item 402(t) \237\ requires issuers to describe any material 
conditions or obligations applicable to the receipt of payment, 
including but not limited to non-compete, non-solicitation, non-
disparagement or confidentiality agreements, their duration, and 
provisions regarding waiver or breach.\238\ We are also adopting a 
requirement, as proposed, to provide a description of the specific 
circumstances that would trigger payment,\239\ whether the payments 
would or could be lump sum, or annual, and their duration, and by whom 
the payments would be provided,\240\ and any material factors regarding 
each agreement.\241\ These narrative items are modeled on the narrative 
disclosure required with respect to termination and change-in-control 
agreements.\242\
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    \237\ Item 402(t)(3) of Regulation S-K.
    \238\ Item 402(t)(3)(iii) of Regulation S-K.
    \239\ Item 402(t)(3)(i) of Regulation S-K.
    \240\ Item 402(t)(3)(ii) of Regulation S-K.
    \241\ 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 post-
termination exercise period, or to lower the exercise price.
    \242\ Item 402(j) of Regulation S-K.
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ii. Elements of Compensation and Presentation of Item 402(t) Table
    In response to commentators' requests for greater flexibility to 
facilitate clear presentation, we note that under our final rule 
issuers are permitted to add additional named executive officers, and 
additional columns or rows to the tabular disclosure, such as to 
disclose cash severance separately from other cash compensation or to 
distinguish ``single-trigger'' and ``double-trigger'' arrangements, so 
long as such disclosure is not misleading.
    As noted in the Proposing Release,\243\ 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. However, 
certain elements required by Section

[[Page 6027]]

14A(b)(1) are not included in Item 402(j). Specifically, 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,\244\ permits 
exclusion of de minimis perquisites and other personal benefits,\245\ 
and does not require presentation of an aggregate total of all 
compensation that is based on or otherwise relates to a 
transaction.\246\
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    \243\ See Section II.D.2 of the Proposing Release.
    \244\ Instruction 5 to Item 402(j).
    \245\ See 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.
    \246\ As proposed, we are adopting 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).
---------------------------------------------------------------------------

    Despite the views of some commentators, we continue to believe that 
Item 402(t) should not permit exclusion of de minimis perquisites and 
other personal benefits because exclusion of these amounts would be 
inconsistent with Section 14A(b)(1), which requires disclosure of ``the 
aggregate total of all such compensation that may [* * *] be paid or 
become payable [* * *].'' Moreover, we continue to believe that the 
Section 14A(b)(1) requirement to disclose the information ``in a clear 
and simple form'' is best satisfied through the use of tabular 
disclosure, which Item 402(j) does not require.
    Item 402(t), like Item 402(j),\247\ does not require separate 
disclosure or quantification with respect to compensation disclosed in 
the Pension Benefits Table and Nonqualified Deferred Compensation 
Table. Item 402(t), as proposed and adopted, also does not require 
disclosure or quantification of previously vested equity awards because 
these award amounts are vested without regard to the transaction. We 
agree with the views expressed by some commentators that previously 
vested equity awards are not compensation ``that is based on or 
otherwise relates to'' the transaction. Similarly, after reviewing the 
comments, we continue to believe that we should not require tabular 
disclosure and quantification of compensation from bona fide post-
transaction employment agreements to be entered into in connection with 
the merger or acquisition transaction. We agree with the views 
expressed by many commentators that future employment arrangements are 
not compensation ``that is based on or otherwise relates to'' the 
transaction.\248\
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    \247\ See Instruction 3 to Item 402(j).
    \248\ Information regarding such future employment agreements is 
subject to disclosure pursuant to Item 5(a) and Item 5(b)(xii) of 
Schedule 14A to the extent that such agreements constitute a 
``substantial interest'' in the matter to be acted upon.
---------------------------------------------------------------------------

    Under the final rule, where Item 402(t) disclosure is included in 
an annual meeting proxy statement,\249\ the price per share amount will 
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, as proposed,\250\ consistent with quantification 
standards used in Item 402(j). However, in response to comments, we 
have modified how the issuer stock price will be measured for 
calculating dollar amounts for the tabular disclosure required by Item 
402(t) in connection with a transactional filing. In a proxy statement 
soliciting shareholder approval of a merger or similar transaction or a 
filing made with respect to a similar transaction, Item 402(t)'s 
tabular quantification of dollar amounts based on issuer stock price 
will be based on the consideration per share, if such value is a fixed 
dollar amount, or otherwise on the average closing price per share over 
the first five business days following the first public announcement of 
the transaction.\251\
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    \249\ A 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 vote. See Section II.D.4 below.
    \250\ Instruction 2 to Item 402(t)(2).
    \251\ Instruction 1 to Item 402(t)(2).
---------------------------------------------------------------------------

iii. Individuals Subject to Item 402(t) Disclosure
    We continue to believe that Item 402(t) disclosure should cover a 
broader group of individuals than is required by Section 14A(b). 
Because compensation arrangements may involve agreements or 
understandings between the acquiring issuer and the named executive 
officers of the target issuer, Item 402(t), as proposed and adopted, 
requires disclosure of the full scope of golden parachute compensation 
applicable to the transaction. We agree with commentators and continue 
to believe that shareholders may find disclosure about these 
arrangements that are not otherwise required to be disclosed by Section 
14A(b) informative to their voting decisions.
    As both proposed and adopted, we have included an instruction 
providing that Item 402(t) disclosure need not be provided for persons 
who are named executive officers because they 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.\252\ However, in response to comments, we are 
clarifying that where Item 402(t) disclosure is provided in a proxy 
statement soliciting shareholder approval of a merger or similar 
transaction or a filing made with respect to a similar transaction, 
this instruction will be applied with respect to the named executive 
officers for whom disclosure was required in the issuer's most recent 
filing requiring Summary Compensation Table disclosure.\253\
---------------------------------------------------------------------------

    \252\ Instruction 1 to Item 402(t), which requires Item 402(t) 
disclosure 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). Item 402(t) disclosure will not be 
required for individuals for whom Item 402(t) disclosure otherwise 
is required by Item 402(a)(3)(iv), and for smaller reporting 
companies, by Item 402(m)(2)(iii).
    \253\ Instruction 1 to Item 402(t)(2) and Instruction 2 to Item 
1011(b). This is similar to the approach used in Instruction 4 to 
Item 5.02 of Form 8-K.
---------------------------------------------------------------------------

iv. Item 402(t) Disclosure in Annual Meeting Proxy Statements
    We are not requiring Item 402(t) disclosure in annual meeting proxy 
statements. We agree with the views expressed by most commentators that 
the proposed Item 402(t) narrative and tabular disclosure should not be 
required in annual meeting proxy statements given the costs and burdens 
this would impose on issuers. We believe that the requirements of Item 
402(j) provide sufficient information to shareholders in that context, 
and note that issuers may also include disclosure pursuant to Item 
402(t) voluntarily if they believe it would permit shareholders to gain 
a better understanding of their compensation programs.
    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) \254\ will 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).\255\ The issuer

[[Page 6028]]

must still 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.
---------------------------------------------------------------------------

    \254\ This exception and the comments we received on the 
exception are discussed in Section II.D.4 below.
    \255\ We note also that one example of material information to 
be addressed in CD&A is the basis for selecting particular 
termination or change-in-control 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.
---------------------------------------------------------------------------

3. Amendments to Schedule 14A, Schedule 14C, Schedule 14D-9, Schedule 
13E-3, Schedule TO, and Item 1011 of Regulation M-A
    We proposed amendments to require that the disclosure set forth in 
Item 402(t) of Regulation S-K be included in merger proxies as well as 
filings for other transactions not referenced in the Act. After 
considering the comments received, we are adopting the amendments to 
Schedule 14A, Schedule 14C, Schedule 14D-9, Schedule 13E-3, and Item 
1011 of Regulation M-A as proposed with slight modifications to Item 
1011 of Regulation M-A. We are also adopting an amendment to Schedule 
TO to clarify that the Item 402(t) disclosure is not required in third-
party bidders' tender offer statements, so long as the transactions are 
not also Rule 13e-3 going-private transactions.
a. Proposed Amendments
    We proposed 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 proposals were intended to implement the 
disclosure requirements in Section 14A(b)(1) as well as to extend the 
new disclosure requirements to similar transactions 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 proposals 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;
     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;
     Registration statements on Forms S-4 and F-4 containing 
disclosure relating to mergers and similar transactions;
     Going private transactions on Schedule 13E-3; and
     Third-party tender offers on Schedule TO and Schedule 14D-
9 solicitation/recommendation statements.
    We also proposed amendments to Item 1011(b) of Regulation M-A that 
would require the bidder \256\ in a third-party tender offer to provide 
information in its Schedule TO about a target's golden parachute 
arrangements only to the extent the bidder has made a reasonable 
inquiry about the golden parachute arrangements and has knowledge of 
such arrangements. In addition, we proposed exceptions to both 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 target or subject company is a foreign 
private issuer, and 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.
---------------------------------------------------------------------------

    \256\ ``Bidder'' is defined in Rule 14d-1(g)(2) [17 CFR 240.14d-
1(g)(2)].
---------------------------------------------------------------------------

b. Comments on the Proposed Amendments
    Comments on the proposal were generally favorable. A number of 
commentators expressed support for our proposed approach to require 
disclosure of golden parachute arrangements in connection with other 
transaction not specifically referenced in the Act.\257\ One 
commentator objected that the proposal goes beyond the scope of the 
statute by requiring disclosure of golden parachute compensation in 
connection with tender and exchange offers.\258\ One commentator also 
questioned whether such disclosure should be required in third-party 
tender offers, given the difficulty bidders may face in obtaining 
accurate information regarding a target company's golden parachute 
arrangements.\259\ Commentators also supported excluding foreign 
private issuers from 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.\260\
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    \257\ See, e.g., letters from ICGN and PGGM.
    \258\ See letter from Wachtell.
    \259\ See letter from ABA.
    \260\ See, e.g., letters from ABA, ICGN, and PGGM.
---------------------------------------------------------------------------

c. Final Rule
    After considering the comments, we are adopting the amendments to 
Schedule 14A, Schedule 14C, Schedule 14D-9, Schedule 13E-3, and Item 
1011 of Regulation M-A as proposed, with slight modifications to Item 
1011 of Regulation M-A. We are also adopting an amendment to Schedule 
TO to provide that bidders in third-party tender offers are not 
required to provide the disclosure required by Item 1011(b) of 
Regulation M-A.
    Issuers could 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 
continue to believe that 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, we are 
adopting amendments that would require the Item 402(t) disclosure in 
various transactions, whether a merger, acquisition, a Rule 13e-3 
going-private transaction or a tender offer.\261\
---------------------------------------------------------------------------

    \261\ As adopted, companies filing solicitation/recommendation 
statements on Schedule 14D-9 in connection with third-party tender 
offers will be obligated to provide this additional disclosure. See 
Item 8 of Schedule 14D-9. However, as explained below, bidders 
filing offer statements on Schedule TO will not have a similar 
obligation. See Item 11 of Schedule TO.
---------------------------------------------------------------------------

    In addition, we note that acquiring companies may solicit proxies 
to approve the issuance of shares or a reverse stock split in order to 
conduct a merger transaction, and that such proxy statements are 
required to include disclosure of information required under Item 14 of 
Schedule 14A pursuant to Note A of Schedule 14A. Thus, we are also 
adopting amendments that would require the Item 402(t) disclosure in 
those proxy statements that are required to include disclosure of 
information required under Item 14 of Schedule 14A pursuant to Note A 
of Schedule 14A.\262\ The shareholder advisory vote required by Section 
14A(b)(2), however, will not be extended to transactions beyond those 
specified in that section.
---------------------------------------------------------------------------

    \262\ See Item 5(a)(5) and Item 5(b)(3) of Schedule 14A, which 
will require acquiring companies to include the Item 402(t) 
disclosure with respect to each named executive officer of both the 
acquiring issuer and the target issuer.
---------------------------------------------------------------------------

    We have revised the final rule in response to comments to provide 
that

[[Page 6029]]

bidders in third-party tender offers will not be required to comply 
with Item 1011(b), which calls for Item 402(t) disclosure. We are 
persuaded that bidders may face difficulties in obtaining the 
information necessary to provide such disclosure \263\ and that it is 
not necessary to require a bidder to provide this information since the 
target companies will be required to provide the Item 402(t) golden 
parachute compensation disclosure in Schedule 14D-9 filed by the tenth 
business day from the date the tender offers are first published, sent 
or given to security holders.\264\ We believe this revision to the 
proposal will alleviate a potential burden that bidders in third-party 
tender offers may encounter while still accomplishing our goal of 
minimizing the regulatory disparity that might otherwise result from 
treating third-party tender offers differently than other transactions 
described in this section by retaining the disclosure requirement in 
Schedule 14D-9. However, we did not adopt a similar revision to the 
proposed changes to Schedule 13E-3; therefore, the disclosure of golden 
parachute arrangements will be required in third-party tender offers 
that are also Rule 13e-3 going-private transactions.\265\ In light of 
the revision to the proposal, we are not adopting the instruction to 
Item 1011(b) of Regulation M-A that would have allowed bidders to 
provide the disclosure only to the extent the information was known 
after making a reasonable inquiry. Therefore, Item 1011(b), as adopted, 
does not include the proposed instruction.
---------------------------------------------------------------------------

    \263\ See letter from ABA.
    \264\ We are adopting an amendment to Schedule TO to avoid 
imposing on bidders the obligation to provide such disclosure. See 
Item 11 of Schedule TO.
    \265\ See Item 15 of Schedule 13E-3.
---------------------------------------------------------------------------

    In addition, we are adopting as proposed an exception to the 
disclosure requirement under Item 1011(b) for targets 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. Consistent with the proposal, we are also adopting 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.\266\ 
We agree with commentators and believe such accommodations are 
appropriate in light of our long-standing accommodation to foreign 
private issuers regarding compensation disclosure.\267\
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    \266\ Instruction 2 to Item 402(t).
    \267\ See, 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].
---------------------------------------------------------------------------

4. Rule 14a-21(c)
    Section 14A(b)(2) 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.
    We proposed Rule 14a-21(c) to implement these requirements. We are 
adopting this rule substantially as proposed with some minor changes in 
response to comments.
a. Proposed Rule
    Proposed Rule 14a-21(c) would require issuers to conduct 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 
shareholder 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. We 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. Consistent with Section 
14A(b)(2), as proposed, issuers would not be required to include in the 
merger proxy a separate shareholder vote on golden parachute 
compensation disclosed in accordance with 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).
b. Comments on the Proposed Amendments
    Comments on the proposal were generally positive. As noted above, 
some commentators indicated that requiring disclosure under Item 402(t) 
of a broader group of individuals than would be covered by the Rule 
14a-21(c) shareholder advisory vote would be potentially confusing to 
investors \268\ as such disclosure goes beyond the requirements of 
Section 14A and could lead to as many as three separate tables.\269\
---------------------------------------------------------------------------

    \268\ See, e.g., letters from Center on Exec. Comp., Davis Polk, 
FSR, NACD, Pfizer, PGGM, Protective Life, Towers Watson, Wachtell, 
Lipton, Rosen & Katz (``Wachtell''), and WorldatWork.
    \269\ See letter from Davis Polk.
---------------------------------------------------------------------------

    Most commentators agreed with our proposed approach that if golden 
parachute arrangements were modified or amended subsequent to being 
subject to the annual shareholder vote under Rule 14a-21(a), a separate 
shareholder vote in the merger proxy should be required to cover only 
the changes to such arrangements,\270\ given that full disclosure of 
the full set of arrangements will also be provided.\271\ Some 
commentators, however, believed that in this circumstance the 
subsequent vote should cover the entire set of golden parachute 
arrangements, not just the changes, so that shareholders have the 
opportunity to vote on the full complement of compensation that would 
be payable.\272\
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    \270\ See, e.g., letters from ABA, Frederic Cook, McGuireWoods, 
NACD, PGGM, Protective Life, and WorldatWork.
    \271\ See, e.g., letter from ABA.
    \272\ See, e.g., letter from CII.
---------------------------------------------------------------------------

    In addition, some commentators recommended that certain changes to 
golden parachute arrangements that were altered or amended subsequent 
to being subject to the shareholder advisory vote under Rule 14a-21(a) 
should be exempt from a separate shareholder advisory vote in a merger 
proxy. In their view, there should be an exemption for certain routine, 
non-substantive changes, such as where the same compensation 
arrangements apply to new named executive officers who were not 
included in the prior disclosure that was subject to the shareholder 
vote,\273\ subsequent grants in the ordinary course of additional 
awards subject to the same acceleration terms that applied to awards 
covered by a previous vote,\274\ routine changes in salary subsequent 
to the prior vote,\275\ and changes that result in a reduction in 
compensation value.\276\ Other

[[Page 6030]]

commentators stated that there should be no exceptions and that a new 
golden parachute vote should be required if there have been any changes 
since the arrangements were subject to the Rule 14a-21(a) shareholder 
advisory vote.\277\
---------------------------------------------------------------------------

    \273\ See, e.g., letters from McGuireWoods, PM&P, Protective 
Life, Steve Quinlivan (``Quinlivan''), and Sullivan.
    \274\ See, e.g., letters from Business Roundtable, Compensia, 
FSR, McGuireWoods, PM&P, Protective Life, Sullivan, and Wachtell.
    \275\ See letter from McGuireWoods.
    \276\ See, e.g., letters from Frederic Cook, Meridian, and 
Protective Life.
    \277\ See, e.g., letters from Glass Lewis and PGGM.
---------------------------------------------------------------------------

c. Final Rule
    After considering the comments, we are adopting Rule 14a-21(c) as 
proposed, with some modifications. Consistent with the proposal, our 
rule does not require issuers to use any specific language or form of 
resolution to be voted on by shareholders. In addition, we note that, 
as provided in Section 14A(c), this shareholder vote will not be 
binding on the issuer or its board of directors.
i. Scope of Rule 14a-21(c) Shareholder Advisory Vote
    Under Rule 14a-21(c), issuers will 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). However, 
issuers are not required to provide a separate shareholder advisory 
vote in proxy statements for meetings at which shareholders are asked 
to approve other proposals, such as an increase in authorized shares or 
a reverse stock split, which may be necessary for the issuer to 
effectuate a transaction. A vote under Rule 14a-21(c) is required only 
if the shareholders are voting to approve the transaction and the 
transaction and golden parachute arrangements come within those covered 
by Section 14A(b). Consistent with the proposal, this advisory vote 
will 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, consistent with the proposal, Rule 
14a-21(c) as adopted requires 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 in Section II.D.2.c.iii above, however, 
disclosure of all golden parachute arrangements will be required, even 
though a vote on the arrangements will not be required.
ii. Exceptions to Rule 14a-21(c) Shareholder Advisory Vote
    Consistent with Section 14A(b)(2) and our proposal, issuers will 
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 
must have included Item 402(t) disclosure of the same golden parachute 
arrangements. Even if the annual meeting proxy statement provided some 
disclosure with respect to golden parachute arrangements,\278\ the 
annual meeting proxy statement must 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 14a-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.
---------------------------------------------------------------------------

    \278\ See 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.
---------------------------------------------------------------------------

    The exception will 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. As proposed and adopted, 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) will be required. New golden parachute arrangements, and any 
revisions to golden parachute arrangements that were subject to a prior 
Section 14A(a)(1) shareholder vote will be subject to the separate 
merger proxy shareholder vote requirement of Section 14A(b)(2) and Rule 
14a-21(c).\279\
---------------------------------------------------------------------------

    \279\ 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, even if such tax gross-up 
becomes payable only because of an increase in the issuer's share 
price.
---------------------------------------------------------------------------

    Additionally, we agree with certain commentators \280\ that changes 
that result only in a reduction in value of the total compensation 
payable should not require a new shareholder vote. If the shareholders 
have had an opportunity to vote on a more highly valued compensation 
package, then we do not believe issuers should be required to provide a 
separate vote on a change that results only in a compensation package 
that has been reduced in value.
---------------------------------------------------------------------------

    \280\ See, e.g., letters from Frederic Cook, Meridian, and 
Protective Life.
---------------------------------------------------------------------------

    We believe that the other examples of changes cited by 
commentators, including changes in compensation because of a new named 
executive officer, additional grants of equity compensation in the 
ordinary course, and increases in salary, are significant changes to 
the golden parachute compensation disclosure and, consistent with 
Section 14A(b)(2), should be subject to a shareholder vote. Because a 
shareholder vote would already have been obtained on portions of the 
arrangements, however, only the new arrangements and revised terms of 
the arrangements previously subject to a Section 14A(a)(1) shareholder 
vote will be subject to the merger proxy separate

[[Page 6031]]

shareholder vote under Section 14A(b)(2) and Rule 14a-21(c).
    Consistent with the proposal, issuers providing for a shareholder 
vote on new arrangements or revised terms will need to provide two 
separate tables under Item 402(t) of Regulation S-K in merger proxy 
statements.\281\ One table will 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 will 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 will need to 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.\282\
---------------------------------------------------------------------------

    \281\ See Instruction 6 to Item 402(t)(2) of Regulation S-K.
    \282\ Instruction 7 to Item 402(t)(2). As discussed above, such 
agreements are not required to be subject to the Rule 14a-21(c) 
shareholder advisory vote, but issuers may voluntarily subject them 
to such a vote.
---------------------------------------------------------------------------

E. Treatment of Smaller Reporting 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 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 Sections 14A(a) and 14A(b) 
disproportionately burden small issuers.
    In the Proposing Release, we did not propose to exempt small 
issuers or smaller reporting companies \283\ from the requirements of 
Sections 14A(a) and 14A(b). Comments on this issue were mixed. Many 
commentators agreed that the requirements of Section 14A should be 
applied to all issuers and that there should be no exemptions for 
smaller reporting companies,\284\ while a number of other commentators 
asserted that smaller reporting companies should be exempt from the 
requirements of Exchange Act Section 14A and our proposed rules.\285\ 
Among those opposed to applying the requirements to smaller reporting 
companies, in addition to stating that these requirements would be a 
burden to smaller reporting companies,\286\ some commentators asserted 
that smaller reporting companies may feel compelled to include 
additional disclosure beyond the scaled requirements otherwise 
applicable to smaller reporting companies, including a CD&A, because of 
such votes,\287\ which would impose significant burdens on these 
issuers. One commentator urged that, if we do not exempt smaller 
reporting companies, we should at least delay implementation of the 
proposed rules for smaller reporting companies so that smaller 
companies would have the opportunity to observe how larger companies 
conduct the vote and respond to the disclosure requirements.\288\
---------------------------------------------------------------------------

    \283\ ``Smaller reporting company'' is defined in Rule 12b-2 
under the Exchange Act.
    \284\ See, e.g., letters from AFSCME, Boston Common, CalPERS, 
Calvert, CII, First Affirmative, Glass Lewis, ICGN, Merkl, PGGM, 
Public Citizen, RAILPEN & USS, SBA of Florida, Senator Levin, Social 
Investment, and Walden.
    \285\ See, e.g., letters from American Bankers Association 
(``Am. Bankers''), Independent Community Bankers of America 
(``ICBA''), NACD, Society of Corp. Sec., and Virginia Bankers 
Association (``VBA'').
    \286\ See, e.g., letters from ABA, Am. Bankers, and VBA.
    \287\ See, e.g., letters from ABA and Society of Corp. Sec.
    \288\ See letter from ABA.
---------------------------------------------------------------------------

    After reviewing and considering these comments, we are adopting a 
temporary exemption for smaller reporting companies so that these 
issuers will not be required to conduct either a shareholder advisory 
vote on executive compensation or a shareholder advisory vote on the 
frequency of say-on-pay votes until the first annual or other meeting 
of shareholders occurring on or after January 21, 2013.\289\ We do not 
believe that smaller reporting companies should be permanently exempt 
from the say-on-pay vote, frequency of say-on-pay 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. However, after reviewing comments on the 
potential burdens on smaller reporting companies, we believe it is 
appropriate to provide additional time before smaller reporting 
companies are required to conduct the shareholder advisory votes on 
executive compensation and the frequency of say-on-pay votes.
---------------------------------------------------------------------------

    \289\ Rules 14a-21(a) and (b).
---------------------------------------------------------------------------

    We believe that a delayed effective date for the say-on-pay and 
frequency votes for smaller reporting companies should allow those 
companies to observe how the rules operate for other companies and 
should allow them to better prepare for implementation of the rules. We 
also believe that delayed implementation for these companies will allow 
us to evaluate the implementation of the adopted rules by larger 
companies and provide us with the additional opportunity to consider 
whether adjustments to the rule would be appropriate for smaller 
reporting companies before the rule becomes applicable to them. We 
believe a temporary exemption by rule is appropriate, under the 
exemptive authority granted by Section 14A(e) of the Exchange Act \290\ 
and also under the Commission's general exemptive authority pursuant to 
Section 36(a)(1) of the Exchange Act, in the public interest and 
consistent with the protection of investors.\291\
---------------------------------------------------------------------------

    \290\ Exchange 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 
considering whether to provide an exemption, the Commission 
considered whether the requirements of Section 14A(a) and (b) as 
applied to smaller reporting companies to conduct a shareholder 
advisory vote on executive compensation and a shareholder advisory 
vote on the frequency of say-on-pay votes could disproportionately 
burden small issuers.
    \291\ 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.''
---------------------------------------------------------------------------

    This temporary exemption for smaller reporting companies does not 
apply to the requirements of Section 14A(b)(2) and Rule 14a-21(c) to 
provide a shareholder advisory vote on golden parachute compensation in 
connection with mergers or other extraordinary transactions. We view 
the temporary exemption as a transition matter that will facilitate 
eventual compliance with the regular, periodic say-on-pay vote 
requirement by smaller reporting

[[Page 6032]]

companies. We do not believe similar considerations support an 
exemption for the shareholder advisory vote on golden parachute 
arrangements in light of the extraordinary nature of the transactions 
involved.
    We have also crafted our amendments to minimize the costs for 
smaller reporting companies, while providing shareholders the 
opportunity to express their views on the companies' compensation 
arrangements. For example, once they fully apply to smaller reporting 
companies, our amendments will provide shareholders of those companies 
the same voting rights with respect to executive compensation as apply 
to shareholders of other companies subject to the proxy rules. We do 
not believe that Section 14A and our final rules, especially given the 
temporary exemption, would unduly burden smaller reporting companies. 
For example, our final rule does 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.\292\ Under the rules we adopt 
today, we do not alter the provision in our rules that smaller 
reporting companies are not required to provide a CD&A. Therefore, the 
amendment to Item 402(b) of Regulation S-K will not apply to smaller 
reporting companies, as such companies are not required to provide a 
CD&A.
---------------------------------------------------------------------------

    \292\ See 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.
---------------------------------------------------------------------------

    Our amendments will, 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 are not required to do 
so under our new rules 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 rules impose additional 
disclosure requirements relating to the shareholder advisory votes 
required by Section 14A, we do not believe our rules will 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 \293\ so the additional 
disclosures should not add significantly to their disclosure burden. As 
a result, we do not believe the rules we adopt today place a 
disproportionate burden on smaller reporting companies.
---------------------------------------------------------------------------

    \293\ See 2006 Executive Compensation Release, supra note 292, 
at Section II.D.1.
---------------------------------------------------------------------------

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 our rules to implement Section 14A(a) have become effective 
by that time. To facilitate compliance with the new statute, we 
addressed certain first year transition issues in the Proposing 
Release. We are now extending those transition positions as described 
below.
    Before effectiveness of the amendment to Rule 14a-6(a) adopted in 
this release, Rule 14a-6 will continue to require 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 the rules we are adopting to 
implement Exchange Act Section 14A become effective, 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).
    Before the amendment to Rule 14a-4 adopted in this release becomes 
effective, Rule 14a-4 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. Until effectiveness of the amendment to Rule 14a-4 adopted 
in this release, 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, although some commentators indicated they are prepared 
for the four-choice frequency vote, the systems of other proxy service 
providers are currently set up to register at most three votes--for, 
against, or abstain--and these providers may have short-term difficulty 
in programming their systems to enable shareholders to vote among four 
choices. As a result, because the preparedness of these providers may 
vary significantly on a firm-by-firm basis, for any proxy materials 
filed for meetings to be held on or before December 31, 2011, 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 there is no discretionary authority to vote proxies 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.\294\
---------------------------------------------------------------------------

    \294\ See Shareholder Communications, Shareholder Participation 
in the Corporate Electoral Process and Corporate Governance 
Generally, Release No. 34-16356 (Nov. 21, 1979) [44 FR 68770].
---------------------------------------------------------------------------

    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, and our final rules provide an exemption from 
such requirement. Until the rules we are adopting to implement Exchange 
Act Section 14A become effective, 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 say-on-pay voting obligations under EESA Section 111(e).
    Finally, as we discussed above, we are adopting a temporary 
exemption for smaller reporting companies to defer application of the 
requirements of Section 14A(a)(1) and (a)(2) and Rule 14a-21(a) and (b) 
to conduct shareholder advisory votes on executive compensation and the 
frequency of such votes. Until the rules we are adopting to implement 
Exchange Act Section 14A

[[Page 6033]]

become effective, we will not object if a smaller reporting company 
does not include a resolution for a shareholder advisory vote on say-
on-pay or the frequency of say-on-pay votes in its proxy statement for 
its annual meeting. As with other issuers, smaller reporting companies 
are required to conduct the shareholder advisory vote on golden 
parachute compensation upon effectiveness of Rule 14a-21(c).

III. Paperwork Reduction Act

A. Background

    Certain provisions of the final amendments contain ``collection of 
information'' requirements within the meaning of the Paperwork 
Reduction Act of 1995 (``PRA'').\295\ We published a notice requesting 
comment on the collection of information requirements in the proposing 
release for the rule amendments, and we submitted these requirements to 
the Office of Management and Budget (``OMB'') for review in accordance 
with the PRA.\296\ The title for the collection of information is:
---------------------------------------------------------------------------

    \295\ 44 U.S.C. 3501 et seq.
    \296\ 44 U.S.C. 3507(d) and 5 CFR 1320.11.
---------------------------------------------------------------------------

    (1) ``Regulation 14A and Schedule 14A'' (OMB Control No. 3235-
0059);
    (2) ``Regulation 14C and Schedule 14C'' (OMB Control No. 3235-
0057);
    (3) ``Form 8-K'' (OMB Control No. 3235-0060);
    (4) ``Form 10'' (OMB Control No. 3235-0064);
    (5) ``Regulation S-K'' (OMB Control No. 3235-0071); \297\
---------------------------------------------------------------------------

    \297\ The 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.
---------------------------------------------------------------------------

    (6) ``Schedule 14D-9'' (OMB Control No. 3235-0102);
    (7) ``Schedule 13E-3'' (OMB Control No. 3235-0007);
    (8) ``Schedule TO'' (OMB Control No. 3235-0515);
    (9) ``Form S-1'' (OMB Control No. 3235-0065);
    (10) ``Form S-4'' (OMB Control No. 3235-0324);
    (11) ``Form S-11'' (OMB Control No. 3235-0067);
    (12) ``Form F-4'' (OMB Control No. 3235-0325); and
    (13) ``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, current 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.

B. Summary of the Final Rules

    As discussed in more detail above, we are adopting new Rule 14a-21 
under the Exchange Act and new Item 24 of Schedule 14A. Rule 14a-21 
will 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 will require 
disclosure in proxy statements with respect to each of these 
shareholder votes. New Rule 14a-21 and new Item 24 of Schedule 14A will 
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 adopting amendments 
to Item 402(b) of Regulation S-K. The 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 the most recent shareholder vote 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 adopting new Item 
402(t) of Regulation S-K and amendments to Item 1011(b) of Regulation 
M-A, Item 5 of Schedule 14A, Item 3 of Schedule 14C, Item 15 of 
Schedule 13E-3, Item 11 of Schedule TO, and Item 8 of Schedule 14D-9. 
These amendments, other than the amendment to Schedule TO, will 
increase existing disclosure burdens for proxy statements, registration 
statements on Form S-4 and F-4, solicitation/recommendation statements 
on Schedule 14D-9, 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, Rule 13e-3 going-
private transactions, and tender offers,\298\ and disclosure of the 
aggregate total of all compensation that may be paid or become payable 
to each named executive officer.
---------------------------------------------------------------------------

    \298\ Companies filing solicitation/recommendation statements on 
Schedule 14D-9 in connection with third-party tender offers will be 
obligated to provide this additional disclosure. However, bidders 
filing tender offer statements on Schedule TO will not have a 
similar obligation.
---------------------------------------------------------------------------

    As discussed in more detail above, we are adopting amendments to 
Form 8-K. The amendments to Form 8-K will increase existing disclosure 
burdens for current reports on Form 8-K 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 
amendments to Item 5 of Schedule 14A, Item 3 of Schedule 14C, Item 402 
of Regulation S-K, Item 1011 of Regulation M-A, Item 15 of Schedule 
13E-3, Item 11 of Schedule TO, and Item 8 of Schedule 14D-9 will 
implement and supplement the requirements under Section 14A of the 
Exchange Act and also will provide additional meaningful disclosure 
regarding golden parachute arrangements and issuers' consideration of 
the shareholder votes and the effect of such votes on issuers' 
compensation policies and decisions. We believe these changes will 
result in more meaningful disclosure for investors making voting or 
investment decisions.
    We are adopting 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 adopting an amendment to Rule

[[Page 6034]]

14a-6 to add the shareholder votes on executive compensation and the 
frequency of shareholder votes on executive compensation required by 
Section 14A(a), as well as any shareholder advisory vote on executive 
compensation, to the list of items that do not trigger the filing of a 
preliminary proxy statement. In addition, we are adopting 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 adopting 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 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 will not increase any existing disclosure burden. We believe these 
amendments will merely clarify existing and new statutory requirements 
or reduce burdens otherwise arising from our proposals. As a result, 
these amendments will not affect any existing disclosure burden.
    Compliance with the proposed amendments by affected U.S. issuers 
will be mandatory. Responses to the information collections will not be 
kept confidential and there would be no mandatory retention period for 
the information disclosed.

C. Summary of Comment Letters and Revisions to Proposals

    In the Proposing Release, we requested comment on the PRA analysis. 
We did not receive any comments that addressed our overall burden 
estimates for the proposed amendments, though our analysis was cited by 
one commentator who discussed our cost-benefit analysis.\299\
---------------------------------------------------------------------------

    \299\ See letter from CCMC.
---------------------------------------------------------------------------

    We have made few substantive modifications to the proposed 
amendments. We have adopted an amendment to Form 8-K to require the 
disclosure we had proposed to require in Form 10-Q or Form 10-K. 
Therefore, we have adjusted our estimates to reflect no changes to 
Forms 10-Q and 10-K and to estimate the increased burdens for Form 8-K.
    We have also revised our amendments with respect to Schedule TO to 
eliminate the proposed requirement for bidders in third-party tender 
offers to provide Item 402(t) disclosure. We have adjusted our 
estimates to reflect no changes to Schedule TO, as any increased burden 
will be reflected in Schedule 13E-3 because Item 402(t) disclosure will 
be required in any tender offer that is also a Rule 13e-3 going-private 
transaction.

D. Revisions to PRA Reporting and Cost Burden Estimates

    We anticipate that the disclosure amendments will 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 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 amendments 
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, in the Proposing Release we estimated 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 included 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, 
the nature and complexity of their golden parachute compensation 
arrangements, 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. As discussed above, as a result of changes 
to our proposed rules, we are slightly reducing the total PRA burden 
and cost estimates that we originally submitted to the OMB in 
connection with the proposed amendments. We estimate the annual 
incremental paperwork burden for all companies to prepare the 
disclosure that would be required under our rule amendments to be 
approximately 24,942 hours of company personnel time and a cost of 
approximately $7,841,200 for the services of outside professionals.
    We derived our new burden hour and cost 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 amendments will 
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 will be required in merger proxy and 
information statements, Forms S-4 and F-4, Schedule 13E-3 and certain 
solicitation/recommendation statements. 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 will 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 will 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.

[[Page 6035]]

    In the Proposing Release, we based our annual burden estimates on 
other assumptions. We have made some small adjustments to these 
estimates to reflect the revisions we made to the amendments. First, we 
continue to assume that the burden hours of the amendments will 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 continue to assume that 
substantially all of the burdens associated with the amendments to Rule 
14a-21 and Item 24 will be associated with Schedule 14A as this will be 
the primary disclosure document in which these items will be prepared 
and presented. In the case of our proposed amendments to Item 402(b) 
and Item 402(t) of Regulation S-K, we continue to assume that the 
burdens associated with the amendments will be associated with various 
disclosure documents as these items will be included in a number of 
forms and statements. We have noted an additional 1 hour for the 
amendments to Form 8-K, and we are no longer proposing any amendments 
that would alter the disclosure burden of Form 10-Q and Form 10-K.
    For each reporting company, we estimate that the amendments will 
impose on average the following incremental burden hours:
     2 hours for the amendments to CD&A.
     1 hour for the amendments to Item 24 of Schedule 14A.
     1 hour for the amendments to Form 8-K.
     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 annual meeting 
proxy statements under the amendments will 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.\300\ The estimated burden is smaller for smaller reporting 
companies as such issuers are not required to include a CD&A.
---------------------------------------------------------------------------

    \300\ Our 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.
---------------------------------------------------------------------------

2. Exchange Act Current Reports
    For purposes of the PRA, we estimate the annual incremental 
paperwork burden for Form 8-K under the amendments will be 
approximately 1 hour per form. Our estimates below also account for the 
fact that each issuer will only be required to include additional 
disclosure in one amended Form 8-K each year the issuer conducts a 
shareholder advisory vote on frequency.
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 amendments is 
approximately 2 hours per form, which represents the additional burden 
associated with our amendments to CD&A.\301\ In making our estimates, 
we note that the additional burdens in CD&A 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.
---------------------------------------------------------------------------

    \301\ We 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.
---------------------------------------------------------------------------

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, and registration statements on Form S-4 and F-4 to be 21 
hours per form, as these forms will 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, and tender offer solicitation/recommendation 
statements and Schedules 13E-3 to be 20 hours per form, as these forms 
will be required to include Item 402(t) disclosure but will 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 current 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.\302\ 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 report on Form 
8-K, 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.
---------------------------------------------------------------------------

    \302\ Figures in both tables have been rounded to the nearest 
whole number.
---------------------------------------------------------------------------

    For 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 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.

[[Page 6036]]

                    Table 1--Incremental Paperwork Burden Under the Amendments For Current Reports; Proxy and Information Statements
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                             Number of      Incremental        Total
                                                             responses     burden hours/    incremental    75%  Company         25%        Professional
                                                               \303\           form        burden hours                    Professional        costs
                                                                     (A)             (B)     (C)=(A)*(B)    (D)=(C)*0.75    (E)=(C)*0.25    (F)=(E)*$400
--------------------------------------------------------------------------------------------------------------------------------------------------------
8-K \304\...............................................           7,212               1           7,212           5,409           1,803        $721,200
Form 10 \305\...........................................               9               2              18               4              14           5,600
DEF 14A \306\...........................................           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
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
--------------------------------------------------------------------------------------------------------------------------------------------------------

     
---------------------------------------------------------------------------

    \303\ The 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 304 through 306, we have reduced the number of 
estimated filings to reflect that the additional disclosure 
requirements will only apply to a smaller number of the forms filed.
    \304\ We calculated the burden hours for Form 8-K 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 8-K to disclose the issuer's plans with respect to 
the frequency vote as the number of proxy statements.
    \305\ The 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 will 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.
    \306\ The 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 will be applicable 
to companies that are large accelerated filers, accelerated filers, 
and non-accelerated filers (that are not smaller reporting 
companies), but will not be applicable to smaller reporting 
companies.

 Table 2--Incremental Paperwork Burden Under the Amendments for Registration Statements, Merger Proxy and Information Statements, Tender Offer Documents
                                                                   and Schedules 13E-3
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                             Number of      Incremental        Total
                                                             responses     burden hours/    incremental    25%  Company         75%        Professional
                                                               \307\           form        burden hours                    Professional        costs
                                                                     (A)             (B)     (C)=(A)*(B)    (D)=(C)*0.25    (E)=(C)*0.75    (F)=(E)*$400
--------------------------------------------------------------------------------------------------------------------------------------------------------
Form S-1 \308\..........................................             485               2             970             243             727        $290,800
Form S-11...............................................              22               2              44              11              33          13,200
Form S-4 \309\..........................................             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 \310\..........................................              14              20             280              70             210          84,000
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 \311\..........................................              29               2              58              14              44          17,600
Reg. S-K................................................             N/A             N/A             N/A             N/A             N/A             N/A
                                                         -----------------------------------------------------------------------------------------------
    Total...............................................  ..............  ..............          16,915           4,229  ..............       5,074,400
--------------------------------------------------------------------------------------------------------------------------------------------------------

IV. Cost-Benefit Analysis

A. Introduction

    We are adopting amendments to implement and supplement the

[[Page 6037]]

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.\312\
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    \307\ The 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 308 through 311, we have reduced the number of 
estimated filings to reflect that the additional disclosure 
requirements will only apply to a smaller number of the forms filed.
    \308\ We have reduced the number of estimated Form S-1 and Form 
S-11 filings to reflect that approximately 60% of these forms will 
not require additional disclosure, as new disclosure required under 
Item 402 will only relate to issuers who are already public 
companies and have conducted a prior shareholder vote on executive 
compensation.
    \309\ We 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 will not apply.
    \310\ We have reduced the number of estimated DEFM 14C filings 
to reflect an approximate 15% of these forms, which will not relate 
to merger transactions but will involve dissolutions and similar 
transactions.
    \311\ We 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 will be subject to the amended disclosure 
required under Item 402 on Form N-2.
    \312\ According 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.''
---------------------------------------------------------------------------

    We are adopting 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 adopting 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.
    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), will 
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 amendments to Item 5 of Schedule 14A and Item 3 of Schedule 14C 
will require disclosure regarding golden parachute compensation 
arrangements in accordance with Section 14A(b)(1) of the Exchange Act. 
We are also adopting amendments to require that additional disclosure 
regarding golden parachute compensation arrangements be included in 
connection with other transactions. We are adopting amendments to 
Regulation M-A, Schedule 14D-9, and Schedule 13E-3 that will require 
additional disclosure regarding golden parachute compensation 
arrangements in connection with Rule 13e-3 going-private transactions 
and tender offers.\313\
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    \313\ Companies filing solicitation/recommendation statements on 
Schedule 14D-9 in connection with third-party tender offers will be 
obligated to provide this additional disclosure. However, bidders 
filing tender offer statements on Schedule TO will not have a 
similar obligation.
---------------------------------------------------------------------------

    We are also adopting 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 adopting amendments to 
Form 8-K 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 adopting 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 adopting 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), as well as any 
shareholder advisory vote on executive compensation, to the list of 
items that do not trigger the filing of a preliminary proxy statement. 
In addition, we are adopting 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.
    The rules we are adopting, which implement the relevant provisions 
of the Dodd-Frank Act, will directly affect most public companies as 
well as potential private acquirers. Our amended 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 amended 
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 amended rules regarding the shareholder approval of 
executive compensation and companies' responses to shareholder votes 
will 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 enhance the operation of our rules 
pursuant to the Act. The enhanced disclosure regarding golden parachute 
compensation will provide a more complete picture of the compensation 
to shareholders as they consider voting and investment decisions 
relating to mergers and similar transactions.
    We are sensitive to the costs and benefits imposed by the rule and 
form amendments we are adopting. The discussion below focuses on the 
costs and benefits of the amendments made by the Commission to 
implement the Act within its permitted discretion, rather than the 
costs and benefits of the Act itself.

B. Comments on the Cost-Benefit Analysis

    In the Proposing Release, we requested qualitative and quantitative 
feedback on the nature of the benefits and costs described and any 
benefits and costs we may have overlooked. We received one comment 
letter relating to the cost-benefit analysis in the Proposing 
Release.\314\ The commentator asserted that we had underestimated the 
costs and burdens involved because we did not take into account the 
following additional categories of costs: Costs

[[Page 6038]]

associated with proxy advisory firms and the potential for companies to 
retain additional consulting services relating to their compensation 
decisions and say-on-pay votes, additional costs associated with 
submitting no-action letter requests under Rule 14a-8, and increased 
costs due to increased demand for proxy solicitation and other 
shareholder communications services.\315\
---------------------------------------------------------------------------

    \314\ See letter from CCMC.
    \315\ See letter from CCMC. See also Section IV.D below for 
additional discussion.
---------------------------------------------------------------------------

C. Benefits

    The amended rules we are adopting today are 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. Our amended rules not 
only implement the shareholder advisory votes required by Section 14A, 
but also require additional disclosure addressing whether, and if so, 
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 will provide timely information to shareholders about the 
issuer's plans for future shareholder advisory votes. The enhanced 
disclosure and amendments to the CD&A requirements in Item 402(b) of 
Regulation S-K about whether, and if so, how an issuer has considered 
the results of a shareholder vote to approve executive compensation 
and, if so, how that consideration has affected its compensation 
policies and decisions will benefit shareholders and other market 
participants by providing potentially useful information for voting and 
investment decisions.
    Our amended rules will 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 adopted 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.
    After reviewing the comments we have received, we are also adopting 
a temporary exemption for smaller reporting companies that will delay 
the implementation of the shareholder advisory votes on say-on-pay and 
frequency required by Section 14A(a) and Rule 14a-21(a) and (b) for a 
two-year period. We believe that a delayed effective date for the say-
on-pay and frequency votes will benefit smaller reporting companies by 
allowing these companies to observe how the rules operate for other 
companies by preparing them for implementation of the rules. We believe 
that delayed implementation for these companies will also allow us to 
evaluate the implementation of the adopted rules by larger companies 
and provide us with the additional opportunity to consider whether 
adjustments to the rule would be appropriate for smaller reporting 
companies before the rule becomes applicable to them.
    In these amended 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 adding a note to Rule 14a-8(i)(10). The note we are adopting will 
reduce potential confusion among shareholders and issuers with respect 
to what may be excluded under our rules in light of the new 
requirements under Section 14A, while preserving the ability of 
shareholders to make proposals relating to executive compensation.
    New Item 402(t) of Regulation S-K will 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 adopted 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 adopting 
amendments to require narrative disclosure to provide additional 
context and 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 combination of narrative and tabular disclosure will 
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 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. Item 402(t) requires 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 will provide 
more detailed, comprehensive, and useful 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,\316\ or a Rule 13e-3 going-private transaction that is 
not subject to Regulation 14A, will benefit

[[Page 6039]]

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 
Item 402(t) will 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 amended rules will enable shareholders to compare more 
easily such compensation among various types of change in control 
transactions and structures. In addition, our amended rules will 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.
---------------------------------------------------------------------------

    \316\ Companies filing solicitation/recommendation statements on 
Schedule 14D-9 in connection with third-party tender offers will be 
obligated to provide this additional disclosure. However, bidders 
filing tender offer statements on Schedule TO will not have a 
similar obligation.
---------------------------------------------------------------------------

    We have adopted such disclosure requirements 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 the information about other executive compensation that 
may be disclosed in proxy materials does not need to be included in 
tabular format pursuant to Item 402(t) of Regulation S-K.
    Our amended rules will 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 amended rules will 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 amended rules specify how the 
statutory requirements operate in connection with the Federal proxy 
rules and accordingly, we believe the amended rules 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 will benefit issuers, 
their shareholders and other market participants.

D. Costs

    We recognize that the amendments we are adopting will impose new 
disclosure requirements on companies and are likely to result in costs 
related to information collection.\317\ The amendments we are adopting 
that require the disclosure of executive compensation in a tabular 
format are 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 amended rules is currently required to be disclosed 
in narrative format in the existing disclosure regime.
---------------------------------------------------------------------------

    \317\ We estimate the annual incremental paperwork burden for 
all companies to prepare the disclosure that would be required under 
both Exchange Act Section 14A and our rule amendments to be 
approximately 24,942 hours of company personnel time and a cost of 
approximately $7,841,200 for the services of outside professionals. 
As noted above in the Comments on the Cost-Benefit Analysis section, 
we received one comment letter relating to the cost-benefit analysis 
that asserted that the PRA numbers cited in the Proposing Release 
underestimated the costs and burdens involved. See letter from CCMC. 
We acknowledge that the PRA estimates do not reflect the full 
magnitude of the economic costs involved, but are estimates of the 
collection of information burden and cost for the limited purpose of 
the PRA. In addition to costs arising from our rule amendments, the 
PRA estimates include collection of information-related costs 
arising from new Exchange Act Section 14A.
---------------------------------------------------------------------------

    Our analysis of the costs of the amendments we are adopting today 
relates to the incremental direct and indirect costs arising from the 
requirements in our rule amendments. The analysis below does not 
reflect any additional direct or indirect costs arising from new 
Exchange Act Section 14A, including the shareholder advisory votes on 
say-on-pay, frequency, and golden parachute compensation, and any 
likely additional costs which would be incurred because of these votes. 
As noted above, one commentator asserted that we had underestimated the 
costs and burdens involved because we did not take into account the 
following additional categories of costs: Costs associated with proxy 
advisory firms and the potential for companies to retain additional 
consulting services relating to their compensation decisions and say-
on-pay votes, additional costs associated with submitting no-action 
letter requests under Rule 14a-8, and increased costs due to increased 
demand for proxy solicitation and other shareholder communications 
services.\318\ We do not believe the additional costs described by the 
commentator will arise as a result of our amendments today as these 
items relate to increased costs resulting from the requirements of 
Section 14A, including the say-on-pay vote, the frequency vote, and the 
shareholder advisory vote on golden parachute compensation. With 
respect to costs associated with submitting no-action letter requests 
and Rule 14a-8, we note that Section 14A(c)(4) specifically provides 
that the Section 14A shareholder advisory votes may not be construed 
``to restrict or limit the ability of shareholders to make proposals 
for inclusion in proxy materials related to executive compensation.'' 
\319\ Although our new rules include a note advising of one 
circumstance when a shareholder proposal may be excluded, the rules do 
not impose any new obligations with respect to Rule 14a-8.
---------------------------------------------------------------------------

    \318\ See letter from CCMC.
    \319\ Exchange Act Section 14A(c)(4).
---------------------------------------------------------------------------

    We are adopting 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 are also 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 will 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. If the disclosure provided by the issuer is not presented 
in a clear manner, the disclosure of golden parachute compensation for 
both target and acquirer executives in target and acquirer proxy 
statements may be confusing to investors. In addition, because parties 
often have to rely on each other for the other side's information, this 
reliance may add to

[[Page 6040]]

the costs of mergers that are ultimately born by shareholders. There 
may also be certain indirect costs to issuers and shareholders as a 
result of our rule amendments, 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 Rule 13e-3 
going-private transaction and companies preparing solicitation/
recommendation statements given their status as targets in third-party 
tender offers may face increased costs because of the required 
disclosure of golden parachute compensation arrangements, including the 
required table and aggregate totals. 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 adopted these disclosure requirements that go 
beyond the requirements of Section 14A(b)(1) because we believe the 
rules will reduce the regulatory disparity that might otherwise result 
from treating such transactions differently from mergers. In response 
to commentators, however, we have eliminated the proposed requirement 
for bidders in third-party tender offers to provide Item 402(t) 
disclosure. We believe this change is appropriate given that target 
companies that are the subject of third-party tender offers will 
provide the 402(t) disclosure in their Schedules 14D-9 within ten days 
after the commencement of the offers. We also believe this change 
addresses the concern expressed by one of the commentators that third-
party bidders, particularly in non-negotiated transactions, may not 
have access to reliable information about the golden parachute 
arrangements between target companies and their named executive 
officers. By retaining the disclosure requirement in Schedule 14D-9, we 
are still able to minimize the regulatory disparity that might 
otherwise result from treating third-party tender offers differently 
than other transactions.
    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 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 revisions to the current 
reporting requirements on Form 8-K 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 will not be unduly burdensome given 
that much of the disclosure is covered by our pre-existing disclosure 
requirements, even though we are adopting rules that require that such 
disclosure be included in both narrative and tabular format. The 
amendments we adopt exceed the pre-existing narrative requirements, as 
we are adopting 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 amended rules 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.
    The note to Rule 14a-8(i)(10) we are adopting may also impose 
certain costs on shareholders as it would permit issuers to exclude 
certain shareholder proposals that would otherwise not be excludable 
under our rules. In addition, our rule amendments may impose certain 
indirect costs on shareholders who might pursue alternative means to 
communicate their positions regarding the frequency of say-on-pay 
votes. We do not believe that the rules we are adopting today would 
impose any additional direct or indirect costs on issuers because of 
shareholder proposals. Any such costs would result from the shareholder 
advisory votes required by Section 14A.

V. 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 \320\ 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) \321\ of the Securities Act and Section 
3(f) \322\ 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.
---------------------------------------------------------------------------

    \320\ 15 U.S.C. 78w(a)(2).
    \321\ 15 U.S.C. 77b(b).
    \322\ 15 U.S.C. 78c(f).
---------------------------------------------------------------------------

    The amendments we are adopting will 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 also adopting 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 are adopting will impose 
a burden on competition.
    The amendments we are adopting will not only implement the 
requirements of Section 14A of the Exchange Act, but will 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 amendments will also enhance the 
transparency of a company's compensation policies. As discussed in 
greater detail above, we believe these benefits will be achieved 
without imposing any significant additional burdens on issuers. As a 
result, the amendments we are adopting should improve the ability of 
investors to make informed voting and investment decisions, and, 
therefore lead to

[[Page 6041]]

increased efficiency and competitiveness of the U.S. capital markets.
    We believe the amendments we are adopting will also benefit issuers 
and their shareholders by specifying in a clear and concise fashion 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 rules will 
allow for more consistent disclosure from all entities and clearer 
disclosure for shareholders. By reducing uncertainty and promoting 
efficient presentation of information, our rules will 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 will also provide additional time before smaller 
reporting companies are required to conduct the shareholder advisory 
votes on executive compensation and the frequency of say-on-pay votes. 
We believe that a delayed effective date for smaller reporting 
companies should allow those companies to observe how the rules operate 
for other companies and will increase efficiency by allowing them to 
better prepare for implementation of the rules. We also believe that 
delayed implementation for these companies will allow us to evaluate 
the implementation of the adopted rules by larger companies and provide 
us with the additional opportunity to consider whether adjustments to 
the rule would be appropriate for smaller reporting companies before 
the rules become applicable to them.
    Our rules will 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 disclosure requirements across different types of 
transactions will help competition as issuers will 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 amended rules will create additional, 
incremental disclosure burdens, we believe that the rules we are 
amending will enhance capital formation by allowing for clearer 
disclosure, more informed voting decisions by investors, and 
consistency across different types of transactions.

VI. Final Regulatory Flexibility Act Analysis

    This Final Regulatory Flexibility Analysis (FRFA) has been prepared 
in accordance with the Regulatory Flexibility Act.\323\ This FRFA 
relates to revisions to the rules under the Exchange Act regarding the 
proxy solicitation process and related executive compensation 
disclosures.
---------------------------------------------------------------------------

    \323\ 5 U.S.C. 601.
---------------------------------------------------------------------------

A. Reasons for, and Objectives of, the Proposed Action

    The rule amendments 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 will apply to such votes. Specifically, 
we are adopting amendments to 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. The amendments 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 adopting the amendments pursuant to 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, as amended, and 
Sections 13, 14(a), 14A, 23(a), and 36 of the Securities Exchange Act 
of 1934, as amended.

C. Significant Issues Raised by Public Comments

    In the Proposing Release, we requested comment on any aspect of the 
IRFA, including the number of small entities that would be affected by 
the proposed amendments, the nature of the impact, how to quantify the 
number of small entities that would be affected, and how to quantify 
the impact of the proposed amendments. We did not receive comments 
specifically addressing the IRFA. However, several commentators 
addressed aspects of the proposed rule amendments that could 
potentially affect small entities. In particular, some commentators 
believed that smaller companies should be exempted from all or part of 
the amendments.\324\ Although we are not adopting a complete exemption 
from the amendments, we have made revisions to the amendments to phase-
in the requirements for a shareholder advisory vote on executive 
compensation and a shareholder advisory vote on the frequency of say-
on-pay votes for two full years to give smaller reporting companies 
more time to prepare for implementation of the rules and so that they 
can observe how larger companies conduct the votes. Smaller reporting 
companies will be required to conduct shareholder advisory votes on 
golden parachute compensation as required by Rule 14a-21(c) without a 
two-year delay.
---------------------------------------------------------------------------

    \324\ See, e.g., letters from Am. Bankers, ICBA, NACD, Society 
of Corp. Sec., and VBA.
---------------------------------------------------------------------------

D. Small Entities Subject to the Final Amendments

    The amendments will affect some companies that are small entities. 
The Regulatory Flexibility Act defines ``small entity'' to mean ``small 
business,'' ``small organization,'' or ``small governmental 
jurisdiction.'' \325\ 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 \326\ and Exchange Act Rule 0-10(a) \327\ 
define 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,\328\ 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.\329\ We believe that certain of the amendments would 
affect small entities that are business development companies that have 
a class of securities registered under Section 12 of the Exchange Act. 
We estimate that there

[[Page 6042]]

are approximately 31 business development companies that may be 
considered small entities.
---------------------------------------------------------------------------

    \325\ 5 U.S.C. 601(6).
    \326\ 17 CFR 230.157.
    \327\ 17 CFR 240.0-10(a).
    \328\ Business 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)].
    \329\ 17 CFR 270.0-10(a).
---------------------------------------------------------------------------

E. Reporting, Recordkeeping, and Other Compliance Requirements

    The 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.

F. Duplicative, Overlapping, or Conflicting Federal Rules

    We believe the amendments would not duplicate, overlap, or conflict 
with other Federal rules.

G. 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 
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 amendments will 
not affect these requirements.\330\ 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 amendments to CD&A, the remaining disclosure requirements apply to 
smaller reporting companies to the same extent as larger issuers, 
following the two-year phase-in period for say-on-pay votes and votes 
on the frequency of say-on-pay votes.
---------------------------------------------------------------------------

    \330\ Rule 12b-2 excludes business development companies from 
the definition of ``smaller reporting companies.''
---------------------------------------------------------------------------

    As noted above, the amendments to CD&A do not apply to smaller 
reporting companies. We are not expanding the existing scaled 
disclosure requirements under Item 402 of Regulation S-K, or 
establishing additional different compliance requirements or an 
exemption from coverage of the proposed amendments for smaller 
reporting companies. The amendments will 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 adopting 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 the 
amendments, all companies will be subject to the same golden parachute 
disclosure requirements. As amended, Schedule 14A will 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 required by our amendment to Item 5 of Schedule 
14A is currently required for all issuers, regardless of size, under 
our amended rules such disclosure will be required to be included in a 
tabular format pursuant to Item 402(t) of Regulation S-K, which will 
include an aggregate total and specific quantification of various 
compensation elements. All companies, regardless of size, will 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 amendments will 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 amendments because, based on our past 
experience, we believe the amendments will be more useful to investors 
if there are specific disclosure requirements. The amendments are 
intended to result in more comprehensive and clear disclosure. In 
addition, the specific disclosure requirements in the amendments will 
promote consistent and comparable disclosure among all companies.

VII. Statutory Authority and Text of the Amendments

    The amendments described in this release are being adopted 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, as amended, 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 Amendments

    For the reasons set out in the preamble, the Commission amends 
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

0
1. The general authority citation for part 229 is revised 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, 78n-1, 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.
* * * * *

[[Page 6043]]

0
2. Amend Sec.  229.402 by:
0
a. Revising the last sentence of paragraph (a)(6)(ii);
0
b. Removing ``and'' at the end of paragraph (b)(1)(v);
0
c. Removing the period and adding in its place ``; and'' at the end of 
paragraph (b)(1)(vi);
0
d. Adding paragraph (b)(1)(vii);
0
e. Revising the last sentence of paragraph (m)(5)(ii); and
0
f. Adding paragraph (t).
    The revisions read as follows:

Sec.  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 the most recent shareholder advisory vote on executive 
compensation required by section 14A of the Exchange Act (15 U.S.C. 
78n-1) or Sec.  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 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 any 
proxy or consent solicitation that includes disclosure under Item 14 of 
Schedule 14A (Sec.  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 acquisition, 
merger, consolidation, sale or other disposition of all or 
substantially all assets of the issuer, as follows:

                                                              Golden Parachute Compensation
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                Tax
                  Name                       Cash  ($)      Equity  ($)    Pension/ NQDC   Perquisites/    reimbursement    Other  ($)      Total  ($)
                                                                                ($)        benefits  ($)        ($)
(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 (Sec.  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 shall be determined as follows: If the 
shareholders are to receive a fixed dollar amount, the price per share 
shall be that fixed dollar amount, and if such value is not a fixed 
dollar amount, the price per share shall be the average closing market 
price of the registrant's securities over the first five business days 
following the first public announcement of the transaction. 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. Include only compensation that 
is based on or otherwise relates to the subject transaction. Apply 
Instruction 1 to Item 402(t) with respect to those executive officers 
for whom disclosure was required in the issuer's most recent filing 
with the Commission

[[Page 6044]]

under the Securities Act (15 U.S.C. 77a et seq.) or Exchange Act (15 
U.S.C. 78a et seq.) that required disclosure pursuant to Item 402(c).
    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-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.
    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 double-trigger 
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 single-trigger 
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 
Sec.  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 
Sec.  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 Sec.  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 subject to the separate shareholder 
vote under section 14A(b)(2) of the Exchange Act and Sec.  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 Sec.  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 Sec.  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, non-solicitation, non-disparagement or confidentiality 
agreements, including the duration of such agreements and provisions 
regarding waiver or breach of such agreements.

    Instructions to Item 402(t).

    1. A registrant that does not qualify as a ``smaller reporting 
company,'' as defined by Sec.  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 Sec.  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 Sec.  240.3b-4 of this chapter.

0
3. Amend Sec.  229.1011 by redesignating paragraph (b) as paragraph (c) 
and adding new paragraph (b) to read as follows:

Sec.  229.1011  (Item 1011) Additional information.

* * * * *
    (b) Furnish the information required by Item 402(t)(2) and (3) of 
this part (Sec.  229.402(t)(2) and (3)) and in the tabular format set 
forth in Item 402(t)(1) of this part (Sec.  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 third-party 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 Sec.  240.3b-4 of this chapter.
    2. For purposes of Instruction 1 to Item 402(t)(2) of this part: If 
the disclosure is included in a Schedule 13E-3 (Sec.  240.13e-100 of 
this chapter) or Schedule 14D-9 (Sec.  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

[[Page 6045]]

company in a Rule 13e-3 transaction, or of the issuer whose securities 
are the subject of the third-party tender offer, shall be determined as 
follows: If the shareholders are to receive a fixed dollar amount, the 
price per share shall be that fixed dollar amount, and if such value is 
not a fixed dollar amount, the price per share shall be the average 
closing market price of such securities over the first five business 
days following the first public announcement of the transaction. 
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. Include only 
compensation that is based on or otherwise relates to the subject 
transaction. Apply Instruction 1 to Item 402(t) with respect to those 
executive officers for whom disclosure was required in the most recent 
filing by the subject company in a Rule 13e-3 transaction or by the 
issuer whose securities are the subject of a third-party tender offer, 
with the Commission under the Securities Act (15 U.S.C. 77a et seq.) or 
Exchange Act (15 U.S.C. 78a et seq.) that required disclosure pursuant 
to Item 402(c).
* * * * *

PART 240--GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF 
1934

0
4. The general authority citation for part 240 is revised to read 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, 78n-1, 78o, 78o-4, 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.
* * * * *

0
5. Amend Sec.  240.13e-100 by revising Item 15 to read as follows:
* * * * *

Sec.  240.13e-100  Schedule 13E-3, Transaction statement under section 
13(e) of the Securities Exchange Act of 1934 and Rule 13e-3 (Sec.  
240.13e-3) thereunder.

* * * * *

Item 15. Additional Information

    Furnish the information required by Item 1011(b) and (c) of 
Regulation M-A (Sec.  229.1011(b) and (c) of this chapter).
* * * * *

0
6. Amend Sec.  240.14a-4 by:
0
a. Adding the phrase ``and votes to determine the frequency of 
shareholder votes on executive compensation pursuant to Sec.  240.14a-
21(b) of this chapter'' at the end of the first sentence of paragraph 
(b)(1);
0
b. Adding paragraph (b)(3).
    The addition reads as follows:

Sec.  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.
* * * * *

0
7. Amend Sec.  240.14a-6 by:
0
a. Revising paragraph (a)(7); and
0
b. Adding the phrase ``to paragraph (a)'' following the words ``Note 
1'', ``Note 2'', ``Note 3'' and ``Note 4''.
    The revision reads as follows:

Sec.  240.14a-6  Filing requirements.

    (a) * * *
    (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 Sec.  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 Sec.  240.14a-20 of this 
chapter, 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 Sec.  240.14a-21(b) of this chapter, or any other 
shareholder advisory vote on executive compensation.
* * * * *

0
8. Amend Sec.  240.14a-8 by adding Note to paragraph (i)(10) to read as 
follows:

Sec.  240.14a-8  Shareholder proposals.

* * * * *
    (i) * * *
    (10) * * *

    Note to paragraph (i)(10): A company may exclude 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 (Sec.  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 that in 
the most recent shareholder vote required by Sec.  240.14a-21(b) of 
this chapter a single year (i.e., one, two, or three years) received 
approval of a majority of votes cast on the matter and the company 
has adopted a policy on the frequency of say-on-pay votes that is 
consistent with the choice of the majority of votes cast in the most 
recent shareholder vote required by Sec.  240.14a-21(b) of this 
chapter.

* * * * *

0
9. Add Sec.  240.14a-21 to read as follows:

Sec.  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 at which 
directors will be elected and for which the rules of the Commission 
require executive compensation disclosure pursuant to Item 402 of 
Regulation S-K (Sec.  229.402 of this chapter), the registrant shall, 
for the first annual or other meeting of shareholders on or after 
January 21, 2011, or for the first annual or other meeting of 
shareholders on or after January 21, 2013 if the registrant is a 
smaller reporting company, and thereafter no later than the annual or 
other meeting of shareholders held in the third calendar year after the 
immediately preceding vote under this subsection, 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.

Instruction to paragraph (a):
    The registrant's resolution shall indicate that the shareholder 
advisory vote under this subsection is to approve the compensation of 
the registrant's named executive officers as disclosed pursuant to Item 
402 of Regulation S-K (Sec.  229.402 of this chapter). The following is 
a non-exclusive example of a resolution that would satisfy the 
requirements of this subsection: ``RESOLVED, that the compensation paid 
to the company's named executive officers, as disclosed pursuant to 
Item 402 of Regulation S-K, including the Compensation Discussion and 
Analysis, compensation tables and narrative discussion is hereby 
APPROVED.''
    (b) If a solicitation is made by a registrant and the solicitation 
relates to an annual or other meeting of shareholders at which 
directors will be elected and for which the rules of the Commission 
require executive compensation disclosure pursuant to Item 402 of 
Regulation S-K (Sec.  229.402 of this chapter), the registrant shall, 
for the first annual or other meeting of shareholders on or after 
January 21, 2011, or for the first annual or other

[[Page 6046]]

meeting of shareholders on or after January 21, 2013 if the registrant 
is a smaller reporting company, and thereafter no later than the annual 
or other meeting of shareholders held in the sixth calendar year after 
the immediately preceding vote under this subsection, 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 Sec.  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 thereafter no later 
than the annual or other meeting of shareholders held in the sixth 
calendar year after the immediately preceding vote under this 
subsection.
    (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 
include a separate resolution subject to shareholder advisory vote to 
approve any agreements or understandings and compensation disclosed 
pursuant to Item 402(t) of Regulation S-K (Sec.  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 Sec.  240.14a-21:

    1. Disclosure relating to the compensation of directors required by 
Item 402(k) (Sec.  229.402(k) of this chapter) and Item 402(r) of 
Regulation S-K (Sec.  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 (Sec.  229.402(s) of this chapter) about the registrant'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 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 Sec.  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) (Sec.  229.402(t) of 
this chapter) in an annual meeting proxy statement, such disclosure 
would be subject to the shareholder advisory 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 (Sec.  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 (Sec.  229.402(m) through (q) 
of this chapter).

0
10. Amend Sec.  240.14a-101 by:
0
a. Removing the dash that appears before paragraph (a) of Item 5 and 
adding in its place an open parenthesis;
0
b. Adding paragraph (a)(5) of Item 5;
0
c. Adding the phrase ``to paragraph (a)'' following the word 
``Instruction'' that follows new paragraph (a)(5) of Item 5;
0
d. Adding paragraph (b)(3) of Item 5;
0
e. Adding the phrase ``to paragraph (b)'' following the word 
``Instruction'' that follows new paragraph (b)(3) of Item 5;
0
f. Adding Item 24.
    The additions read as follows:

Sec.  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 
(Sec.  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 
(Sec.  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 Sec.  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 Act (15 U.S.C. 78n-1), briefly explain the general 
effect of each vote, such as whether each such vote is non-binding, 
and, when applicable, disclose the current frequency of shareholder 
advisory votes on executive compensation required by Rule 14a-21(a) and 
when the next such shareholder advisory vote will occur.
0
11. Amend Sec.  240.14c-101 by adding paragraph (c) of Item 3 to read 
as follows:

Sec.  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 (Sec.  229.402(t) of this chapter).
* * * * *

0
12. Amend Sec.  240.14d-100 by revising Item 11 to read as follows:

Sec.  240.14d-100  Tender offer statement pursuant to section 14(d)(1) 
of the Securities Exchange Act of 1934.

* * * * *
    Item 11. Additional Information.
    Furnish the information required by Item 1011(a) and (c) of 
Regulation M-A (Sec.  229.1011 of this chapter).
* * * * *

0
13. Amend Sec.  240.14d-101 by amending Item 8 to add the words ``and 
(c)'' after ``Item 1011(b)''.

PART 249--FORMS, SECURITIES EXCHANGE ACT OF 1934

0
14. The general authority citation for part 249 continues 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.
* * * * *

0
15. Amend Form 8-K (referenced in Sec.  249.308), Item 5.07, by 
revising paragraph (b), adding paragraph (d), and revising Instruction 
1 to read as follows:

    Note: The text of Form 8-K does not, and this amendment will 
not, appear in the Code of Federal Regulations.

[[Page 6047]]

Form 8-K

* * * * *
Item 5.07. Submission of Matters to a Vote of Security Holders
* * * * *
    (b) If the meeting involved the election of directors, the name of 
each director elected at the meeting, as well as a brief description of 
each other matter voted upon at the meeting; and state the number of 
votes cast for, against or withheld, as well as the number of 
abstentions and broker non-votes as to each such matter, including a 
separate tabulation with respect to each nominee for office. For the 
vote on the frequency of shareholder advisory votes on executive 
compensation required by section 14A(a)(2) of the Securities Exchange 
Act of 1934 (15 U.S.C. 78n-1) and Sec.  240.14a-21(b), state the number 
of votes cast for each of 1 year, 2 years, and 3 years, as well as the 
number of abstentions.
* * * * *
    (d) No later than one hundred fifty calendar days after the end of 
the annual or other meeting of shareholders at which shareholders voted 
on the frequency of shareholder votes on the compensation of executives 
as required by section 14A(a)(2) of the Securities Exchange Act of 1934 
(15 U.S.C. 78n-1), but in no event later than sixty calendar days prior 
to the deadline for submission of shareholder proposals under Sec.  
240.14a-8, as disclosed in the registrant's most recent proxy statement 
for an annual or other meeting of shareholders relating to the election 
of directors at which shareholders voted on the frequency of 
shareholder votes on the compensation of executives as required by 
section 14A(a)(2) of the Securities Exchange Act of 1934 (15 U.S.C. 
78n-1(a)(2)), by amendment to the most recent Form 8-K filed pursuant 
to (b) of this Item, 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 in its proxy materials until the next 
required vote on the frequency of shareholder votes on the compensation 
of executives.
* * * * *
    Instruction 1 to Item 5.07. The four business day period for 
reporting the event under this Item 5.07, other than with respect to 
Item 5.07(d), shall begin to run on the day on which the meeting ended. 
* * *
* * * * *

    By the Commission.

    Dated: January 25, 2011.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-1971 Filed 2-1-11; 8:45 am]
BILLING CODE 8011-01-P