This has been an eventful year in corporate governance. As companies prepare for the 2011 proxy season, it is important to review some of the legislative and regulatory events and key trends of 2010 that are expected to have an impact over the next year. Data from the last proxy season and the revised proxy policies of Institutional Shareholder Services (ISS) for 2011 both indicate that executive compensation will continue to be the main focus for shareholders in the New Year.

2010 Highlights

Executive compensation dominated the corporate governance landscape in 2010. Most significantly, provisions in the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”)1 will require shareholder “say-on-pay,” “say-when-on-pay” and “say on golden parachutes” votes.2 The Securities and Exchange Commission (SEC) has released proposed rules relating to these requirements.3 Though the proposed rules have not yet been finalized, the initial say-on-pay and say-when-on-pay votes must be included in all proxy statements relating to an issuer’s first annual or other shareholder meeting occurring on or after Jan. 21, 2011. The “say on golden parachutes” votes will not be required until the effective date of the final SEC rules implementing those provisions. All three votes are non-binding, so the impact of a negative vote will be difficult to measure. The Dodd-Frank Act also eliminated broker discretionary voting on executive compensation matters,4 which will give even greater power to institutional shareholders and corporate governance activists.

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