Topic: Domestic Commerce — Banking
Subject: Finance and financial sector
Date: 2009-07-21 00:00:00

Corporate and Financial Institution Compensation Fairness Act of 2009 - (Sec. 2) Amends the Securities Exchange Act of 1934 to require that any proxy or consent or authorization for an annual shareholders meeting provide for a separate shareholder vote to approve executive compensation for named executive officers as disclosed pursuant to rules of the Securities and Exchange Commission (SEC). States that the shareholder vote shall not be: (1) binding on the corporation or the board of directors; (2) construed as overruling a board decision, or as creating or implying any additional fiduciary duty by the board; or (3) construed as restricting or limiting shareholder ability to place executive compensation proposals within proxy materials. Requires solicitations that seek shareholder approval of an acquisition, merger, consolidation, or proposed sale or other disposition of assets to disclose clearly and simply in the proxy or consent solicitation material any agreements or understandings with named executive officers of the disposing or the acquiring issuer concerning (golden parachute) compensation (present, deferred, or contingent) that is based upon or relates to such asset disposition, including the aggregate total compensation to or on behalf of such executive officer. Requires separate shareholder approval of such golden parachute agreements or understandings and compensation, as disclosed, unless already subject to a shareholder vote at an annual shareholders meeting. States that a separate shareholder vote on golden parachute compensation shall not be: (1) binding on the issuer or its board of directors or the person making the solicitation; or (2) construed as overruling a decision by such person or issuer, or as creating or implying any additional fiduciary duty by any such person or issuer. Requires certain institutional investment managers to report annually how they voted on any shareholder vote. Authorizes the SEC, after taking into account the potential impact on smaller reporting issuers, to exempt certain categories of issuers from the requirements of this Act. (Sec. 3) Directs the SEC to direct the national securities exchanges and national securities associations to prohibit the listing of any class of equity security of an issuer that does not comply with specified requirements for compensation committees (or equivalent bodies) established by and amongst an issuer's board of directors for the purpose of determining and approving the compensation arrangements for the issuer's executive officers. Requires each member of the compensation committee of the issuer's board of directors to be independent. Prohibits any compensation committee member from accepting any consulting, advisory, or other compensatory fee from the issuer. Allows for SEC exemptions from such requirements for particular relationships. Requires a compensation consultant, legal counsel, or other adviser to an issuer's compensation committee to meet SEC independence standards. Grants the compensation committee of each issuer discretionary authority to retain and obtain the advice of a compensation consultant meeting SEC independence standards. Requires any proxy or consent solicitation material for an annual shareholder meeting to disclose whether the issuer's compensation committee retained and obtained the advice of an independent compensation consultant. Authorizes a compensation committee to retain and obtain the advice of independent counsel and other independent advisers. Directs the SEC to study and report to Congress on the use of independent compensation consultants. (Sec. 4) Directs federal regulators to prescribe jointly regulations requiring each covered financial institution to disclose the structures of all incentive-based compensation arrangements sufficient to determine whether the compensation structure: (1) is aligned with sound risk management; (2) is structured to account for the time horizon of risks; and (3) meets other criteria appropriate to reduce unreasonable incentives offered by such institutions for employees to take undue risks. Requires such regulators to prescribe jointly regulations that prohibit any compensation structure or incentive-based payment arrangement that encourages inappropriate risks by financial institutions that could: (1) threaten the safety and soundness of covered financial institutions; or (2) present serious adverse effects upon economic conditions or financial stability. Exempts covered financial institutions with assets of less than $1 billion from these compensation arrangement disclosure requirements. Prohibits any such regulation from requiring the recovery (clawback) of incentive-based compensation under compensation arrangements in effect on the date of enactment of this Act if such an agreement is for a period of no more than 24 months. Declares that this Act shall neither prevent nor limit the recovery of incentive-based compensation under any other applicable law. Directs the Comptroller General to study and report to Congress on whether there is a correlation between compensation structures and excessive risk taking. Requires the study, in determining whether a company failed, or nearly failed but for government assistance, to focus on: (1) companies that received exceptional assistance under the Troubled Asset Relief Program (TARP) under the Emergency Economic Stabilization Act of 2009 (EESA) or other forms of significant government assistance, including under the Automotive Industry Financing Program, the Targeted Investment Program, the Asset Guarantee Program, and the Systemically Significant Failing Institutions Program; (2) the Federal National Mortgage Association (Fannie Mae); (3) the Federal Home Loan Mortgage Corporation (Freddie Mac); and (4) companies that participated in the SEC's Consolidated Supervised Entities Program as of January 2008.