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Securities Law Summary
Senate Bill Aims for Greater Transparency and Accountability in Corporate Executive Compensation
Corporate Executive Compensation Accountability and Transparency Act
S.2866, 04/15/2008
Basic Information
The Senate has referred to its Committee on Finance a “bill to require greater disclosure of senior corporate officer compensation, to empower shareholders and investors to protect themselves from fraud, to limit conflicts of interest in determining senior corporate officer compensation, to ensure integrity in Federal contracting, to close corporate tax loopholes utilized to subsidize senior corporate officer compensation, and for other purposes.” (Title, S. 2866).
In particular, the proposed legislation, when enacted into law, amends the Sarbanes-Oxley Act of 2002 “to extend from 12 to 36 months the look-back period for any bonuses, incentive-based or equity-based compensation, or profits realized from the sale of securities which must be reimbursed to a securities issuer by its chief executive officer and chief financial officer if the issuer is required to prepare an accounting restatement because of material noncompliance, as a result of misconduct, with any financial reporting requirement."(Thomas-Library of Congress).
To this end, the bill requires the Securities Exchange and Commission (SEC) to promulgate regulations to ensure more effective enforcement of such forfeitures. It also requires such regulations to cite specified illicit accounting irregularities. Id.
In addition, the proposed legislation seeks to amend the Securities Exchange Act of 1934 “to require that any proxy, consent, or authorization for an annual (or special) meeting of shareholders provide for a separate nonbinding shareholder vote on executive compensation, especially executive compensation (golden parachute payments) based on or related to disposition of substantially all the assets of an issuer in an acquisition, merger, consolidation, sale, or other disposition. ” Id.
The bill proposed to direct the SEC to promulgate regulations clarifying and strengthening requirements governing disclosure of compensation of consultants or advisors to a compensation committee.
Finally, it amends the Federal Property and Administrative Services Act of 1949 to: (1) require certain federal contractors to disclose their executive compensation structures; and (2) require Armed Forces defense procurement contracts also to disclose such structures.
View a PDF of the proposed legislation.Service
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