Speech by SEC Commissioner:
Statement at Open Meeting to Adopt a Final Rule Regarding Shareholder Approval of Executive Compensation and Golden Parachute Compensation
Commissioner Troy A. Paredes
U.S. Securities and Exchange Commission
January 25, 2011
Thank you, Chairman Schapiro.
I join my colleagues in thanking the staff — particularly those from the Division of Corporation Finance — for your efforts on this rulemaking.
The recommendation before us is to adopt rule amendments giving shareholders of public companies a vote on executive compensation (so-called “say on pay”), a vote on the frequency of shareholder say on pay, and a vote on certain golden parachutes paid in connection with business combinations. These rule changes would implement Section 951 of the Dodd-Frank Act.
Unfortunately, I am not able to support the final rule and respectfully dissent. The following captures the bottom line of my two primary objections to the final rule.
First, I disagree with the final rule’s treatment of smaller reporting companies. The Commission has afforded smaller reporting companies a temporary exemption from the say-on-pay and frequency votes until 2013; the Commission has provided no similar phase-in for smaller companies when it comes to golden parachute compensation.
Simply put, the Commission did not do enough for smaller companies. The Commission should have afforded smaller public companies an outright exemption from the new regulatory requirements.
Second, the final rule should have included an exemption for newly public companies. In particular, a company should be exempt from the say-on-pay and frequency votes for a limited period after going public. One option — which the final rule does not embrace — would have been to exempt newly public companies from the voting requirements until after the company’s first annual meeting.
The exemptions for smaller and newly public companies that I favor are grounded in my view that the Commission needs to do more to avoid unduly burdening smaller public companies with unwarranted regulatory demands.* Further, when fashioning the regulatory regime, the Commission needs to do more to guard against the risk that the regulatory regime itself will dissuade companies from going public and listing on U.S. exchanges. Indeed, we need to be mindful to chart a regulatory path that promotes the competitiveness of our markets and that is calibrated to the circumstances of smaller companies so that we encourage job growth, innovation, and competition.
* Troy A. Paredes, Commissioner, U.S. Securities & Exchange Commission, Remarks at the 2010 SEC Government-Business Forum on Small Business Capital Formation (Nov. 18, 2010), available at http://sec.gov/news/speech/2010/spch111810tap.htm.