I 
111TH CONGRESS 
1ST SESSION H. R. 2861 
To amend the Securities Exchange Act of 1934 to provide for rules and 
standards relating to the election of boards of directors and certain 
requirements relating to compensation of executives. 
IN THE HOUSE OF REPRESENTATIVES 
JUNE 12, 2009 
Mr. PETERS (for himself, Ms. WATERS, Mr. DINGELL, Mr. WELCH, Mr. 
HOLT, Mr. DEFAZIO, and Mr. CAPUANO) introduced the following bill; 
which was referred to the Committee on Financial Services 
A BILL 
To amend the Securities Exchange Act of 1934 to provide 
for rules and standards relating to the election of boards 
of directors and certain requirements relating to com-
pensation of executives. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Shareholder Empower-
ment Act of 2009’’. 
SEC. 2. MAJORITY VOTING FOR DIRECTORS. 
The Securities Exchange Act of 1934 is amended by 
adding after section 16 the following new section: 
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‘‘SEC. 16A. ELECTION OF DIRECTORS. 
‘‘(a) STANDARDS RELATING TO ELECTION OF DI-
RECTORS.— 
‘‘(1) COMMISSION RULES.—Not later than 270 
days after the date of enactment of this section, the 
Commission shall, by rule, direct the national securi-
ties exchanges and national securities associations to 
prohibit the listing of any security of an issuer that 
is not in compliance with the requirements of any 
portion of paragraph (2). Such rules shall provide 
for appropriate procedures for an issuer to have an 
opportunity to cure any defects that would be the 
basis for such a prohibition before the imposition of 
such prohibition. 
‘‘(2) STANDARDS
FOR
ELECTION
OF
DIREC-
TORS.— 
‘‘(A) MAJORITY
VOTING.—Each issuer 
shall, to the extent permitted under State law, 
provide in its governing documents that— 
‘‘(i) directors in uncontested elections 
shall be elected by a majority of the votes 
cast as to each nominee; and 
‘‘(ii) in contested elections where the 
number of nominees exceeds the number of 
directors to be elected, directors shall be 
elected by the vote of a plurality of the 
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shares represented at any meeting and en-
titled to vote on the election of directors. 
‘‘(B) RESIGNATION POLICY.—Each issuer 
shall also, to the extent permitted under State 
law, adopt procedures under which any director 
who is not elected to a new term shall offer to 
tender his or her resignation to the board of di-
rectors. The board of directors, with the advice 
of a committee of the board if such a committee 
has been established for that purpose, shall de-
termine what action should be taken as to that 
resignation and shall publicly disclose its deci-
sion and the rationale for that decision within 
a reasonable period after certification of the 
election results. 
‘‘(b) SHAREHOLDER ACCESS TO THE PROXY IN DI-
RECTOR ELECTIONS.— 
‘‘(1) RULE.—Not later than 270 days after the 
date of enactment of this section, the Commission 
shall, by rule, require that in proxy statements and 
proxies, authorizations or consents prepared by an 
issuer pursuant to section 14, the issuer shall iden-
tify and provide security holders with an opportunity 
to vote on candidates for the board of directors who 
have been nominated by holders in the aggregate at 
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least 1 percent of the issuer’s voting securities for 
at least 2 years prior to a record date established by 
the issuer for a meeting of security holders. 
‘‘(2) APPLICATION.—This rule shall specify the 
information to be provided to an issuer by security 
holders who nominate candidates for inclusion in an 
issuer’s proxy materials under this section and shall 
require the issuer to disclose information about such 
candidates in the issuer’s proxy materials to the 
same extent that information must be disclosed 
about candidates nominated by the issuer. This rule 
shall apply only when eligible security holders have 
nominated fewer than a majority of the number of 
directors then authorized to serve on the board of di-
rectors, and the rule shall specify procedures to be 
followed if different security holders nominate can-
didates sufficient to constitute a majority of the 
board of directors. 
‘‘(3) EFFECTIVE DATE.—The rule shall apply 
to proxy voting for meetings of security holders held 
on or after January 1, 2010, except to the extent 
that a meeting was originally scheduled to be held 
in 2009, but was adjourned to 2010. 
‘‘(c) 
BROKER
DISCRETIONARY
VOTING
IN 
UNCONTESTED DIRECTOR ELECTIONS.—Not later than 
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270 days after the date of enactment of this section, the 
Commission shall by, rule, require that a broker shall not 
be allowed to vote securities on an uncontested election 
to the board of directors of an issuer to the extent that 
the beneficial owner of those securities has not provided 
specific instructions to the broker. The rule shall apply 
to proxy voting for meetings of security holders held on 
or after January 1, 2010, except to the extent that a meet-
ing was originally scheduled to be held in 2009, but was 
adjourned to 2010. 
‘‘(d) INDEPENDENT CHAIRMAN OF THE BOARD OF 
DIRECTORS.— 
‘‘(1) COMMISSION RULES.—Not later than 270 
days after the date of enactment of this section, the 
Commission shall, by rule, direct the national securi-
ties exchanges and national securities associations to 
prohibit the listing of any security of an issuer that 
is not in compliance with the requirements of any 
portion of paragraph (2). Such rules shall provide 
for appropriate procedures for an issuer to have an 
opportunity to cure any defects that would be the 
basis for such a prohibition before the imposition of 
such prohibition. 
‘‘(2) INDEPENDENT CHAIRMAN OF THE BOARD 
OF
DIRECTORS.—Each issuer shall provide in its 
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governing documents or a public statement of cor-
porate policy that, to the extent possible and con-
sistent with the issuer’s status as a publicly traded 
company, the chairman of the board of directors 
shall be an independent director who has not pre-
viously served as an executive officer of the issuer. 
Such rule shall be implemented with due regard for 
contracts in existence on the date of enactment of 
this section. For purposes of this subsection, an 
‘independent director’ shall be one who during the 
preceding 5 years has not been— 
‘‘(A) employed by the issuer in an execu-
tive capacity; 
‘‘(B) an employee, director or owner great-
er than 20 percent of the beneficial shares of a 
firm that is a paid adviser or consultant to the 
issuer; 
‘‘(C) employed by a significant customer or 
supplier of the issuer; 
‘‘(D) a party to a personal services con-
tract with the issuer, as well as with the 
issuer’s Chair, chief executive officer, or other 
senior executive officer; 
‘‘(E) an employee, officer or director of a 
foundation, university or other non-profit orga-
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nization that receives the greater of $100,000 
or 1 percent of total annual donations from the 
issuer; 
‘‘(F) a relative of an executive of the 
issuer; 
‘‘(G) part of an interlocking directorate in 
which the issuer’s chief executive officer or an-
other executive serves on the board of another 
issuer employing that director; and 
‘‘(H) engaged in any other relationship 
with the issuer or senior executives that the 
Commission determines would not render that 
director an independent director.’’. 
SEC. 3. EXECUTIVE COMPENSATION REQUIREMENTS. 
The Securities Exchange Act of 1934 is further 
amended by adding after the section 16A, as added by 
section 2, the following new section 
‘‘SEC. 16B. EXECUTIVE COMPENSATION REQUIREMENTS. 
‘‘(a) SHAREHOLDER APPROVAL OF EXECUTIVE COM-
PENSATION.— 
‘‘(1) ANNUAL SHAREHOLDER VOTE ON EXECU-
TIVE COMPENSATION.—Any proxy or consent or au-
thorization for an annual or other meeting of an 
issuer shall permit a separate vote by shareholders 
to approve the compensation of senior executive offi-
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cers, as disclosed pursuant to the compensation dis-
closure rules of the Commission (which disclosure 
shall include the compensation discussion and anal-
ysis, the compensation tables, and any related mate-
rial). 
‘‘(2) NON-BINDING
NATURE
OF
VOTE.—A 
shareholder vote described in paragraph (1) shall not 
be binding on the board of directors of an issuer and 
may not be construed as overruling a decision by 
such board, nor to create or imply any additional fi-
duciary duty by such board, nor shall such vote be 
construed to restrict or limit the ability of security 
holders to make proposals for inclusion in proxy ma-
terials related to executive compensation. 
‘‘(3) DEADLINE FOR RULES.—Not later than 1 
year after the date of enactment of this section, the 
Commission shall issue any final rules and regula-
tions required by this section. 
‘‘(4) EXCEPTION.—This provision shall not 
apply to any issuer who is subject to a similar 
recoupment requirement under another provision of 
Federal law. 
‘‘(b) INDEPENDENT COMPENSATION ADVISERS.— 
‘‘(1) REQUIREMENT.—Not later than 1 year 
after the date of enactment of this section, the Com-
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mission shall, by rule, require that if an issuer’s 
board of directors or a committee thereof retains an 
individual adviser or advisory firm in conjunction 
with negotiating employment contracts or compensa-
tion agreements with the issuer’s executives, the in-
dividual adviser and his or her firm shall be inde-
pendent of the issuer, its executives and directors, 
and shall report solely to the board of directors or 
the committee thereof responsible for executive com-
pensation. The rule shall further require that issuers 
shall not agree to indemnify or limit the liability of 
compensation advisers or advisory firms. 
‘‘(2) DETERMINATION.—In determining the ex-
tent to which an adviser or advisory firm is inde-
pendent of an issuer within the meaning of this sec-
tion, the Commission shall consider such matters 
as— 
‘‘(A) the extent (as measured by annual 
fees and other relevant metrics) to which an in-
dividual adviser or advisory firm provides serv-
ices in conjunction with negotiating employment 
contracts or compensation agreements with the 
issuer’s executives, as compared to other serv-
ices that the adviser or advisory firm provides 
to the issuer or executives; 
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‘‘(B) whether individual advisers are per-
mitted to hold equity and do hold equity in the 
issuer; and 
‘‘(C) whether an advisory firm’s incentive 
compensation plan links the compensation of in-
dividual advisers to the advisory firm’s provi-
sion of other services to the issuer. 
‘‘(c) CLAWBACKS
OF UNEARNED PERFORMANCE- 
BASED PAY.— 
‘‘(1) COMMISSION RULES.—Not later than 270 
days after the date of enactment of this section, the 
Commission shall, by rule, direct the national securi-
ties exchanges and national securities associations to 
prohibit the listing of any security of an issuer that 
is not in compliance with the requirements of any 
portion of paragraph (2). Such rules shall provide 
for appropriate procedures for an issuer to have an 
opportunity to cure any defects that would be the 
basis for such a prohibition before the imposition of 
such prohibition. 
‘‘(2) RECOUPMENT OF UNEARNED COMPENSA-
TION.—An issuer’s board of directors or a committee 
thereof shall develop and disclose a policy for review-
ing unearned bonus payments, incentive payments, 
or equity payments that were awarded to executive 
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officers owing to fraud, financial results that require 
restatement, or some other cause. The policy should 
require recovery or cancellation of any unearned 
payments to the extent that it is feasible and prac-
tical to do so. 
‘‘(3) EXCEPTION.—This provision shall not 
apply to any issuer who is subject to a similar 
recoupment requirement under another provision of 
Federal law. 
‘‘(d) SEVERANCE AGREEMENTS TIED TO PERFORM-
ANCE.— 
‘‘(1) COMMISSION RULES.—Not later than 270 
days after the date of enactment of this section, the 
Commission shall, by rule, direct the national securi-
ties exchanges and national securities associations to 
prohibit the listing of any security of an issuer that 
is not in compliance with the requirements of any 
portion of paragraph (2). Such rules shall provide 
for appropriate procedures for an issuer to have an 
opportunity to cure any defects that would be the 
basis for such a prohibition before the imposition of 
such prohibition. 
‘‘(2) SEVERANCE AGREEMENTS TIED TO PER-
FORMANCE.—An issuer’s board of directors or a 
committee thereof shall not enter into agreements 
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providing for severance payments to a senior execu-
tive officer who is terminated because of poor per-
formance as an executive, as determined by the 
board of directors. To the extent that an issuer is 
able to terminate a senior executive officer for cause, 
poor performance by the executive, as determined by 
the board of directors, shall be considered as one 
such cause. The rule shall be implemented with due 
regard for contracts in existence on the date of en-
actment of this section. 
‘‘(e) IMPROVED DISCLOSURE
OF COMPENSATION 
TARGETS.—Not later than 1 year after the date of enact-
ment of this section, the Commission shall, by rule, require 
additional disclosure of specific performance targets that 
are used by issuers to determine a senior executive offi-
cer’s eligibility for bonuses, equity and incentive com-
pensation. The Commission shall consider methods to im-
prove disclosure in situations when it is claimed that dis-
closure would result in competitive harm to the issuer, in-
cluding, requirements that the issuer describe its past ex-
perience with similar target levels, disclose any inconsist-
encies between compensation targets and targets set in 
other contexts, submit a request for confidential treatment 
of the performance targets under Commission rules, or 
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disclose the data after disclosure would no longer be con-
sidered competitively harmful.’’. 
Æ 
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