More Dodd-Frank Compensation Rules Coming in 2012

Because of a lack of deadlines in the Dodd-Frank Act, the Securities and Exchange Commission (SEC) has delayed rulemaking on newly required compensation disclosures. However, the SEC indicates we can expect the new rules sometime soon.

According to Kaye Scholer Corporate Partner Jeff London, “I think everybody does expect the SEC to promulgate the rules. The questions we have are when and how these rules will come out. The timing is important as companies have to make changes administratively when implementing the rules.”

London also addressed the issue of existing compensation contracts that do not have the new clawback provisions built into the terms. “Some of our clients are already incorporating general clawback clauses in their employment agreements or compensation plans,” he explained. “If you have not done so, you can ask existing executives to sign off on the amendment to include the provision in individual employment agreements.”

He also opined that many companies are already using performance metrics in designing their performance based compensation programs, typically including a group of performance indicators to determine executive compensation.

Jeff London observed that among his clients, the larger companies do seem to be more prepared for the upcoming regulations, and have started to seek guidance on the upcoming requirements. “Unfortunately, smaller companies do not have the manpower,” he concluded.