SEC Approves Enhanced Disclosure About Risk, Compensation and Corporate Governance

FOR IMMEDIATE RELEASE
2009-268

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Washington, D.C., Dec. 16, 2009 — The Securities and Exchange Commission today approved rules to enhance the information provided to shareholders so they are better able to evaluate the leadership of public companies.


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Beginning in the upcoming annual reporting and proxy season, the new rules will improve corporate disclosure regarding risk, compensation and corporate governance matters when voting decisions are made.

"Good corporate governance is a system in which those who manage a company — that is, officers and directors — are effectively held accountable for their decisions and performance. But accountability is impossible without transparency," said SEC Chairman Mary L. Schapiro. "By adopting these rules, we will improve the disclosure around risk, compensation, and corporate governance, thereby increasing accountability and directly benefiting investors."

In particular, the new rules require disclosures in proxy and information statements about:

The new rules, which will be effective Feb. 28, 2010, also require quicker reporting of shareholder voting results.

Specifically, the Commission's approved rules will:

Require Disclosure of a Company's Compensation Policies and Practices as They Relate to the Company's Risk Management:

The SEC approved a rule that would help investors determine whether a company has incentivized excessive or inappropriate risk-taking by employees. Among other things, it would require a narrative disclosure about the company's compensation policies and practices for all employees, not just executive officers, if the compensation policies and practices create risks that are reasonably likely to have a material adverse effect on the company. Smaller reporting companies will not be required to provide the new disclosure.

Enhance Information About Directors and Nominees:

The SEC approved new rules to improve information about directors and nominees for director. The new requirements include for each director and director nominee, disclosure of:

Disclose How Diversity Is Considered in the Director Nomination Process:

The SEC approved a rule that would require disclosure of whether, and if so how, a nominating committee considers diversity in identifying nominees for director.

If the nominating committee or the board has a policy with regard to the consideration of diversity in identifying director nominees, the final rules require disclosure of how this policy is implemented and how the nominating committee or the board assesses the effectiveness of its policy.

Provide Information About Board Leadership Structure and the Board's Role in Risk Oversight:

The SEC approved rules relating to board leadership structure and the board's role in risk oversight. The rules require disclosure about:

Require Quicker Reporting of Voting Results:

The SEC approved amendments to Form 8-K that would require companies to disclose the results of a shareholder vote within four business days after the end of the meeting at which the vote was held. This replaces the requirement to disclose voting results in Forms 10-K and 10-Q, which often are filed months after the relevant meeting.

Revise the Summary Compensation Table:

The SEC approved revisions to the reporting of stock and option awards in the Summary Compensation Table and the Director Compensation Table to better reflect the compensation committees' decisions with regard to these awards.

Enhance Disclosure About Compensation Consultants:

The SEC approved rules requiring disclosure about the fees paid to compensation consultants and their affiliates in certain circumstances. This is intended to provide investors with information to help them better assess the potential conflicts of interest a compensation consultant may have in recommending executive compensation. The final rules are consistent with the rule proposal, but include exceptions for circumstances that should not raise the potential conflicts of interest.