Sharehold-ers of publicly listed companies will get to weigh in on executive compensation through advisory votes, under a new rule adopted by US securities regulators on Tuesday. The "say-on-pay" rules, approved in a 3-2 vote by the Securities and Exchange Commission, would implement a provision in the Dodd-Frank Wall Street reform law.
It is designed to give shareholders greater input over executive compensation after many investors expressed outrage during the financial crisis at lavish pay practices. The say-on-pay vote is non-binding, although companies generally want to avoid the embarrassment of a "no" vote.
Shareholders would also get to vote on certain so-called "golden parachute" pay packages in connection with a merger or acquisition, and companies would be required to make additional disclosures about such compensation arrangements. Republican commissioners dissented on the rule in part because it only gives a temporary exemption to small public companies. The rule "should have afforded smaller companies an outright exemption," said Republican Commissioner Troy Paredes.
In other actions on Tuesday, the SEC unanimously proposed that advisers to hedge funds and other private funds report key information to regulators. The proposal, also required by the Dodd-Frank law, would arm the newly formed Financial Stability Oversight Council with better information about hedge funds and other private pools of capital to ensure their trading activities do not pose a risk to the broader marketplace.