As the 2010 proxy season gets started, below are changes implemented in 2009 that will affect proxy statements filed in 2010 (and a few changes likely to occur in 2010):

  • NYSE Rule 452. Under new NYSE Rule 452, brokers are no longer permitted to vote for the election of directors without instructions from their clients. The rule is effective for all shareholder meetings held in 2010 and beyond and affects all public companies because it applies to all brokers regulated by the New York Stock Exchange (essentially all brokers).
  • Delaware Corporate Law. Delaware corporate law now permits (but does not require) companies to adopt (i) a “proxy access” bylaw that would require the company to include shareholder nominees for director in the company’s proxy statement and (ii) a “proxy reimbursement” bylaw that would require the company to reimburse shareholders for the costs of proxy solicitation.
  • Executive Compensation and Risk Disclosure. Public companies must disclose whether and how their overall compensation policies create incentives that increase risk. Examples of information companies must consider disclosing include: (i) the general design philosophy of compensation for employees whose behavior would be most affected by the incentives established by such compensation policies; (ii) the company’s risk assessment or incentive considerations in structuring its compensation policies; and (iii) how the company’s compensation policies relate to the realization of risks resulting from the actions of employees in both the short term and the long term. The required discussion of the relationship between compensation and risk applies to all employees, not just named executive officers.
  • Compensation Consultants. Public companies must make a number of disclosures regarding compensation consultants, including fees paid for services, if consultant fees exceed $120,000 for all services not related to recommending executive/director compensation ("other services"). The rules are designed to prevent compensation consultant conflicts of interest.
  • Grant Date Value of Equity Awards. Public companies must report the aggregate grant date value of stock options and other equity awards, calculated in accordance with FASB ASC Topic 718 (formerly FASB 123R), instead of the amount recognized for financial statement reporting purposes. The SEC believes compensation decisions are generally made based on the grant date value, not the amount the company ultimately recognizes for financial statement reporting purposes. The grant date value of performance based awards will be based on the “probable outcome of the performance conditions.”
  • Voting Results. New SEC rules include a requirement to disclose proxy voting results in a Form 8-K filing within four business days after a shareholder meeting, instead of months later in a 10-Q filing.
  • Nominee and Director Disclosures. Public companies must expand biographical disclosures about directors and nominees, including disclosure of (i) any directorship held in the past 5 years, (ii) specific legal proceedings involving a director in the past 10 years, and (iii) whether nominating committees consider diversity, as defined by the company, as a factor in choosing director nominees.
  • Say on Pay. Some version of “say on pay” will likely be enacted by Congress in 2010 or 2011. Say on pay would most likely require a company to provide shareholders with an annual non-binding vote on the compensation policies and practices described in the proxy statement.
  • Proxy Access. The SEC has again proposed allowing shareholders of a certain size (e.g., 3% holders of companies with assets of $75-700 million) to be able to include nominees for directors on the company’s proxy statement. The Commission did not implement the proposed rules in time for the 2010 proxy season, but may implement them sometime during 2010.