Last January the SEC took aim at lavish corporate pay enacting new rules that give shareholders a voice on salaries, bonuses and so-called golden parachutes. These “say on pay” rules let investors vote on executive compensation at publicly traded companies. However, boards do not necessarily have to listen since the votes are considered nonbinding. The measures are the latest rules born from the Dodd-Frank Act, the financial regulatory overhaul enacted last July.
Lawmakers are hoping to discourage companies from awarding lucrative packages that encourage risky behavior.
The rules require shareholder votes to take place at least once every three years, although investors can opt to increase the frequency. The agency also mandated separate nonbinding votes on golden parachutes. The companies must disclose in public filings whether they followed shareholders’ wishes. So, shareholders’ votes are non-binding. Why bother?
Link to the WSJ coverage here.
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