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Securities Regulation and Corporate Governance > Posts > SEC Provides Guidance on Say-on-Pay Description Language
SEC Provides Guidance on Say-on-Pay Description Language

On February 13, 2012, the Securities and Exchange Commission provided guidance on how a company should describe its advisory vote to approve executive compensation that is required by Rule 14a-21 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), on its proxy card and voting instruction form.  While the interpretation specifically addresses only the phrasing on the proxy card, best practice is to use the same terminology when identifying the voting item within the proxy statement.  The guidance was provided under Compliance and Disclosure Interpretation (“C&DI”) Question 169.07 and stated the following:

"Question: On its proxy card and voting instruction form, how should a company describe the advisory vote to approve executive compensation that is required by Exchange Act Rule 14a-21?
 
Answer: The following are examples of advisory vote descriptions that would be consistent with Rule 14a-21’s requirement for shareholders to be given an advisory vote to approve the compensation paid to a company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K.
  • To approve the company's executive compensation
  • Advisory approval of the company’s executive compensation
  • Advisory resolution to approve executive compensation
  • Advisory vote to approve named executive officer compensation 
The following is an example of an advisory vote description that would not be consistent with Rule 14a-21 because it is not clear from the description as to what shareholders are being asked to vote on. Shareholders could interpret this example as asking them to vote on whether or not the company should hold an advisory vote on executive compensation, rather than asking shareholders to actually approve, on an advisory basis, the compensation paid to the company’s named executive officers.
  • To hold an avisory vote on executive compensation" 
The CD&I can be found under Question 169.07 at the following link: http://www.sec.gov/divisions/corpfin/guidance/exchangeactrules-interps.htm#169-07

 


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