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 ‘‘Corporate and Financial 
Institution Compensation Fairness Act of 2009’’. 
SEC. 2. SHAREHOLDER VOTE ON EXECUTIVE COMPENSA-
TION DISCLOSURES. 
(a) AMENDMENT.—Section 14 of the Securities Ex-
change Act of 1934 (15 U.S.C. 78n) is amended by adding 
at the end the following new subsection: 
‘‘(i) ANNUAL SHAREHOLDER APPROVAL OF EXECU-
TIVE COMPENSATION.— 
‘‘(1) ANNUAL VOTE.—Any proxy or consent or 
authorization (the solicitation of which is subject to 
the rules of the Commission pursuant to subsection 
(a)) for an annual meeting of the shareholders to elect 
directors (or a special meeting in lieu of such meet-
ing) where proxies are solicited in respect of any secu-
rity registered under section 12 occurring on or after 
the date that is 6 months after the date on which 
final rules are issued under paragraph (4), shall pro-
vide for a separate shareholder vote to approve the 
compensation of executives as disclosed pursuant to 
the Commission’s compensation disclosure rules for 
named executive officers (which disclosure shall in-
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clude the compensation committee report, the com-
pensation discussion and analysis, the compensation 
tables, and any related materials, to the extent re-
quired by such rules). The shareholder vote shall not 
be binding on the issuer or the board of directors and 
shall 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 share-
holders to make proposals for inclusion in such proxy 
materials related to executive compensation. 
‘‘(2) SHAREHOLDER
APPROVAL
OF
GOLDEN 
PARACHUTE COMPENSATION.— 
‘‘(A) DISCLOSURE.—In any proxy or con-
sent solicitation material (the solicitation of 
which is subject to the rules of the Commission 
pursuant to subsection (a)) for a meeting of the 
shareholders occurring on or after the date that 
is 6 months after the date on which final rules 
are issued under paragraph (4), at which share-
holders 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 
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material, in a clear and simple form in accord-
ance 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) con-
cerning 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 and 
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. 
‘‘(B) 
SHAREHOLDER
APPROVAL.—Any 
proxy or consent or authorization relating to the 
proxy or consent solicitation material containing 
the disclosure required by subparagraph (A) 
shall provide for a separate shareholder vote to 
approve such agreements or understandings and 
compensation as disclosed, unless such agree-
ments or understandings have been subject to a 
shareholder vote under paragraph (1). A vote by 
the shareholders shall not be binding on the 
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issuer or the board of directors of the issuer or 
the person making the solicitation and shall not 
be construed as overruling a decision by any 
such person or issuer, nor to create or imply any 
additional fiduciary duty by any such person or 
issuer. 
‘‘(3) DISCLOSURE
OF
VOTES.—Every institu-
tional investment manager subject to section 13(f) 
shall report at least annually how it voted on any 
shareholder vote pursuant to paragraphs (1) or (2) of 
this section, unless such vote is otherwise required to 
be reported publicly by rule or regulation of the Com-
mission. 
‘‘(4) RULEMAKING.—Not later than 6 months 
after the date of the enactment of the Corporate and 
Financial Institution Compensation Fairness Act of 
2009, the Commission shall issue final rules to imple-
ment this subsection. 
‘‘(5) EXEMPTION AUTHORITY.—The Commission 
may exempt certain categories of issuers from the re-
quirements of this subsection, where appropriate in 
view of the purpose of this subsection. In determining 
appropriate exemptions, the Commission shall take 
into account, among other considerations, the poten-
tial impact on smaller reporting issuers.’’. 
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(b) PROHIBITION ON CLAWBACKS.— 
(1) PROHIBITION.—No compensation of any ex-
ecutive of an issuer, having been approved by a ma-
jority of shareholders pursuant to section 14(i) of the 
Securities Exchange Act of 1934 (as added by sub-
section (a)), may be subject to any clawback except— 
(A) in accordance with any contract of such 
executive providing for such a clawback; or 
(B) in the case of fraud on the part of such 
executive, to the extent provided by Federal or 
State law. 
(2) REGULATIONS.—The Securities and Ex-
change Commission shall promulgate rules necessary 
to implement and enforce paragraph (1). 
SEC. 3. COMPENSATION COMMITTEE INDEPENDENCE. 
(a) STANDARDS RELATING TO COMPENSATION COM-
MITTEES.—The Securities Exchange Act of 1934 (15 U.S.C. 
78a et seq.) is amended by inserting after section 10A the 
following new section: 
‘‘SEC. 10B. STANDARDS RELATING TO COMPENSATION COM-
MITTEES. 
‘‘(a) COMMISSION RULES.— 
‘‘(1) IN GENERAL.—Effective not later than 9 
months after the date of enactment of the Corporate 
and Financial Institution Compensation Fairness Act 
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of 2009, the Commission shall, by rule, direct the na-
tional securities exchanges and national securities as-
sociations to prohibit the listing of any class of equity 
security of an issuer that is not in compliance with 
the requirements of any portion of subsections (b) 
through (f). 
‘‘(2) OPPORTUNITY
TO
CURE
DEFECTS.—The 
rules of the Commission under paragraph (1) shall 
provide for appropriate procedures for an issuer to 
have an opportunity to cure any defects that would 
be the basis for a prohibition under paragraph (1) be-
fore the imposition of such prohibition. 
‘‘(3) EXEMPTION AUTHORITY.—The Commission 
may exempt certain categories of issuers from the re-
quirements of subsections (b) through (f), where ap-
propriate in view of the purpose of this section. In de-
termining appropriate exemptions, the Commission 
shall take into account, among other considerations, 
the potential impact on smaller reporting issuers. 
‘‘(b) INDEPENDENCE
OF
COMPENSATION
COMMIT-
TEES.— 
‘‘(1) IN GENERAL.—Each member of the com-
pensation committee of the board of directors of the 
issuer shall be independent. 
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‘‘(2) CRITERIA.—In order to be considered to be 
independent for purposes of this subsection, a member 
of a compensation committee of an issuer may not, 
other than in his or her capacity as a member of the 
compensation committee, the board of directors, or 
any other board committee accept any consulting, ad-
visory, or other compensatory fee from the issuer. 
‘‘(3) EXEMPTION AUTHORITY.—The Commission 
may exempt from the requirements of paragraph (2) 
a particular relationship with respect to compensa-
tion committee members, where appropriate in view 
of the purpose of this section. 
‘‘(4) DEFINITION.—As used in this section, the 
term ‘compensation committee’ means— 
‘‘(A) a committee (or equivalent body) es-
tablished by and amongst the board of directors 
of an issuer for the purpose of determining and 
approving the compensation arrangements for 
the executive officers of the issuer; and 
‘‘(B) if no such committee exists with re-
spect to an issuer, the independent members of 
the entire board of directors. 
‘‘(c) INDEPENDENCE STANDARDS FOR COMPENSATION 
CONSULTANTS AND OTHER COMMITTEE ADVISORS.—Any 
compensation consultant or other similar adviser to the 
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compensation committee of any issuer shall meet standards 
for independence established by the Commission by regula-
tion. 
‘‘(d) COMPENSATION COMMITTEE AUTHORITY RELAT-
ING TO COMPENSATION CONSULTANTS.— 
‘‘(1) IN GENERAL.—The compensation committee 
of each issuer, in its capacity as a committee of the 
board of directors, shall have the authority, in its sole 
discretion, to retain and obtain the advice of a com-
pensation consultant meeting the standards for inde-
pendence promulgated pursuant to subsection (c), and 
the compensation committee shall be directly respon-
sible for the appointment, compensation, and over-
sight of the work of such independent compensation 
consultant. This provision shall not be construed to 
require the compensation committee to implement or 
act consistently with the advice or recommendations 
of the compensation consultant, and shall not other-
wise affect the compensation committee’s ability or 
obligation to exercise its own judgment in fulfillment 
of its duties. 
‘‘(2) DISCLOSURE.—In any proxy or consent so-
licitation material for an annual meeting of the 
shareholders (or a special meeting in lieu of the an-
nual meeting) occurring on or after the date that is 
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1 year after the date of enactment of the Corporate 
and Financial Institution Compensation Fairness Act 
of 2009, each issuer shall disclose in the proxy or con-
sent material, in accordance with regulations to be 
promulgated by the Commission whether the com-
pensation committee of the issuer retained and ob-
tained the advice of a compensation consultant meet-
ing the standards for independence promulgated pur-
suant to subsection (c). 
‘‘(3) REGULATIONS.—In promulgating regula-
tions under this subsection or any other provision of 
law with respect to compensation consultants, the 
Commission shall ensure that such regulations are 
competitively neutral among categories of consultants 
and preserve the ability of compensation committees 
to retain the services of members of any such category. 
‘‘(e) AUTHORITY TO ENGAGE INDEPENDENT COUNSEL 
AND OTHER ADVISORS.—The compensation committee of 
each issuer, in its capacity as a committee of the board of 
directors, shall have the authority, in its sole discretion, to 
retain and obtain the advice of independent counsel and 
other advisers meeting the standards for independence pro-
mulgated pursuant to subsection (c), and the compensation 
committee shall be directly responsible for the appointment, 
compensation, and oversight of the work of such inde-
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pendent counsel and other advisers. This provision shall not 
be construed to require the compensation committee to im-
plement or act consistently with the advice or recommenda-
tions of such independent counsel and other advisers, and 
shall not otherwise affect the compensation committee’s abil-
ity or obligation to exercise its own judgment in fulfillment 
of its duties. 
‘‘(f) FUNDING.—Each issuer shall provide for appro-
priate funding, as determined by the compensation com-
mittee, in its capacity as a committee of the board of direc-
tors, for payment of compensation— 
‘‘(1) to any compensation consultant to the com-
pensation committee that meets the standards for 
independence promulgated pursuant to subsection (c), 
and 
‘‘(2) to any independent counsel or other adviser 
to the compensation committee.’’. 
(b) STUDY AND REVIEW REQUIRED.— 
(1) IN GENERAL.—The Securities and Exchange 
Commission shall conduct a study and review of the 
use of compensation consultants meeting the stand-
ards for independence promulgated pursuant to sec-
tion 10B(c) of the Securities Exchange Act of 1934 
(as added by subsection (a)), and the effects of such 
use. 
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(2) REPORT TO CONGRESS.—Not later than 2 
years after the rules required by the amendment made 
by this section take effect, the Commission shall sub-
mit a report to the Congress on the results of the 
study and review required by this paragraph. 
SEC. 4. ENHANCED COMPENSATION STRUCTURE REPORT-
ING TO REDUCE PERVERSE INCENTIVES. 
(a) ENHANCED DISCLOSURE AND REPORTING OF COM-
PENSATION ARRANGEMENTS.— 
(1) IN GENERAL.—Not later than 9 months after 
the date of enactment of this Act, the appropriate 
Federal regulators jointly shall prescribe regulations 
to require each covered financial institution to dis-
close to the appropriate Federal regulator the struc-
tures of all incentive-based compensation arrange-
ments offered by such covered financial institutions 
sufficient to determine whether the compensation 
structure— 
(A) is aligned with sound risk management; 
(B) is structured to account for the time ho-
rizon of risks; and 
(C) meets such other criteria as the appro-
priate Federal regulators jointly may determine 
to be appropriate to reduce unreasonable incen-
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tives offered by such institutions for employees to 
take undue risks that— 
(i) could threaten the safety and 
soundness of covered financial institutions; 
or 
(ii) could have serious adverse effects 
on economic conditions or financial sta-
bility. 
(2) RULES OF CONSTRUCTION.—Nothing in this 
subsection shall be construed as requiring the report-
ing of the actual compensation of particular individ-
uals. Nothing in this subsection shall be construed to 
require a covered financial institution that does not 
have an incentive-based payment arrangement to 
make the disclosures required under this subsection. 
(b) PROHIBITION
ON CERTAIN COMPENSATION AR-
RANGEMENTS.—Not later than 9 months after the date of 
enactment of this Act, and taking into account the factors 
described in subparagraphs (A), (B), and (C) of subsection 
(a)(1), the appropriate Federal regulators shall jointly pre-
scribe regulations that prohibit any incentive-based pay-
ment arrangement, or any feature of any such arrangement, 
that the regulators determine encourages inappropriate 
risks by covered financial institutions that— 
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(1) could threaten the safety and soundness of 
covered financial institutions; or 
(2) could have serious adverse effects on economic 
conditions or financial stability. 
(c) ENFORCEMENT.—The provisions of this section 
shall be enforced under section 505 of the Gramm-Leach- 
Bliley Act and, for purposes of such section, a violation of 
this section shall be treated as a violation of subtitle A of 
title V of such Act. 
(d) DEFINITIONS.—As used in this section— 
(1) the term ‘‘appropriate Federal regulator’’ 
means— 
(A) the Board of Governors of the Federal 
Reserve System; 
(B) the Office of the Comptroller of the Cur-
rency; 
(C) the Board of Directors of the Federal 
Deposit Insurance Corporation; 
(D) the Director of the Office of Thrift Su-
pervision; 
(E) the National Credit Union Administra-
tion Board; 
(F) the Securities and Exchange Commis-
sion; and 
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(G) the Federal Housing Finance Agency; 
and 
(2) the term ‘‘covered financial institution’’ 
means— 
(A) a depository institution or depository 
institution holding company, as such terms are 
defined in section 3 of the Federal Deposit Insur-
ance Act (12 U.S.C. 1813); 
(B) a broker-dealer registered under section 
15 of the Securities Exchange Act of 1934 (15 
U.S.C. 78o); 
(C) a credit union, as described in section 
19(b)(1)(A)(iv) of the Federal Reserve Act; 
(D) an investment advisor, as such term is 
defined in section 202(a)(11) of the Investment 
Advisers Act of 1940 (15 U.S.C. 80b–2(a)(11)); 
(E) the Federal National Mortgage Associa-
tion; 
(F) the Federal Home Loan Mortgage Cor-
poration; and 
(G) any other financial institution that the 
appropriate Federal regulators, jointly, by rule, 
determine should be treated as a covered finan-
cial institution for purposes of this section. 
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(e) EXEMPTION
FOR CERTAIN FINANCIAL INSTITU-
TIONS.—The requirements of this section shall not apply 
to covered financial institutions with assets of less than 
$1,000,000,000. 
(f) GAO STUDY.— 
(1) STUDY REQUIRED.— 
(A) IN GENERAL.—The Comptroller General 
of the United States shall carry out a study to 
determine whether there is a correlation between 
compensation structures and excessive risk tak-
ing. 
(B) FACTORS TO CONSIDER.—In carrying 
out the study required under subparagraph (A), 
the Comptroller General shall— 
(i) consider compensation structures 
used by companies from 2000 to 2008; and 
(ii) compare companies that failed, or 
nearly failed but for government assistance, 
to companies that remained viable through-
out the housing and credit market crisis of 
2007 and 2008, including the compensation 
practices of all such companies. 
(C) DETERMINING COMPANIES THAT FAILED 
OR NEARLY FAILED.—In determining whether a 
company failed, or nearly failed but for govern-
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ment assistance, for purposes of subparagraph 
(B)(ii), the Comptroller General shall focus on— 
(i) companies that received exceptional 
assistance under the Troubled Asset Relief 
Program under title I of the Emergency 
Economic Stabilization Act of 2009 (12 
U.S.C. 5211 et seq.) or other forms of sig-
nificant government assistance, including 
under the Automotive Industry Financing 
Program, the Targeted Investment Program, 
the Asset Guarantee Program, and the Sys-
temically Significant Failing Institutions 
Program; 
(ii) the Federal National Mortgage As-
sociation; 
(iii) the Federal Home Loan Mortgage 
Corporation; and 
(iv) companies that participated in the 
Security and Exchange Commission’s Con-
solidated Supervised Entities Program as of 
January 2008. 
(2) REPORT.—Not later than the end of the 1- 
year period beginning on the date of the enactment of 
this Act, the Comptroller General shall issue a report 
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to the Congress containing the results of the study re-
quired under paragraph (1). 
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Union Calendar No. 131 
111TH CONGRESS 
1ST SESSION 
H. R. 3269 
[Report No. 111–236] 
A BILL 
To amend the Securities Exchange Act of 1934 to 
provide shareholders with an advisory vote on ex-
ecutive compensation and to prevent perverse in-
centives in the compensation practices of finan-
cial institutions. 
JULY 30, 2009 
Reported with an amendment, committed to the Com-
mittee of the Whole House on the State of the Union, 
and ordered to be printed 
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