On February 24, 2009, the SEC released three Compliance and Disclosure Interpretations, which it says "comprise the Division's interpretations of Section 7001 of the American Recovery and Reinvestment Act of 2009," which amended Section 111(e) of the Emergency Economic Stabilization Act (EESA). Regrettably, these interpretations are nearly useless for those of us in the real world trying to make judgments that comply with the law. (See Broc's Blog for some "cheeky" commentary.)
Q&A number one advises us that a separate shareholder vote on executive compensation is not required for any meeting other than the annual meeting of shareholders for which proxies will be solicited for the election of directors or a special meeting in lieu of such annual meeting.
Q&A number two advises us that, if a smaller reporting company is subject to the EESA's Say-on-Pay provision, it need not provide compensation discussion and analysis under Item 402 of Regulation S-K.
Q&A number three addresses the most important issue facing financial institutions that participated in TARP: Whether the institution must include its own proposal in this year's proxy statement to have shareholders approve executive compensation in order to comply with EESA Section 111(e)(1). However, instead of answering this critical question, the interpretation refers to Senator Dodd's letter of last week on this matter—without approving or disapproving of the letter's views—and advises us that, if the company "determines to comply with EESA Section 111(e)(1)" by including its own proposal to have shareholders approve executive compensation, the company will be required to file a preliminary proxy statement pursuant to Exchange Act Rule 14a-6(a). If the company faces special circumstances and would like to request acceleration of Rule 14a-6(a)'s 10-day review period, it "should contact the Assistant Director of the office that reviews the company's filings to discuss the special circumstances the company faces and how the ten-day review period could be accelerated." A non-answer.
Michael S. Melbinger