Shareholder Approval of Executive Compensation of TARP Recipients, 32474-32479 [E9-16037]

Download as PDF 32474 Federal Register / Vol. 74, No. 129 / Wednesday, July 8, 2009 / Proposed Rules Service Bulletin No. 57–005, dated August 30, 2007; Pilatus Aircraft Ltd. Pilatus PC–6 Service Bulletin No. 57–004, dated April 16, 2007; and Chapter 57–00–02 of Pilatus Aircraft Ltd. Pilatus PC–6 Aircraft Maintenance Manual, dated November 30, 2008 (referenced as revision 9 in EASA AD No.: 2007–0241R3), for related information. Issued in Kansas City, Missouri, on July 1, 2009. Scott A. Horn, Acting Manager, Small Airplane Directorate, Aircraft Certification Service. [FR Doc. E9–16142 Filed 7–7–09; 8:45 am] BILLING CODE 4910–13–P SECURITIES AND EXCHANGE COMMISSION 17 CFR PART 240 [Release No. 34–60218; File No. S7–12–09] RIN 3235–AK31 Shareholder Approval of Executive Compensation of TARP Recipients mstockstill on DSKH9S0YB1PROD with PROPOSALS AGENCY: Securities and Exchange Commission. ACTION: Proposed rule. SUMMARY: We are proposing amendments to the proxy rules under the Securities Exchange Act of 1934 to set forth certain requirements for U.S. registrants subject to Section 111(e) of the Emergency Economic Stabilization Act of 2008. Section 111(e) of the Emergency Economic Stabilization Act of 2008 requires companies that have received financial assistance under the Troubled Asset Relief Program (‘‘TARP’’) to permit a separate shareholder advisory vote to approve the compensation of executives, as disclosed pursuant to the compensation disclosure rules of the Commission, during the period in which any obligation arising from financial assistance provided under the TARP remains outstanding. The proposed amendments are intended to help implement this requirement by specifying and clarifying it in the context of the federal proxy rules. DATES: Comments should be received on or before September 8, 2009. ADDRESSES: Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/proposed.shtml ); • Send an e-mail to rulecomments@sec.gov. Please include File Number S7–12–09 on the subject line; or VerDate Nov<24>2008 17:19 Jul 07, 2009 Jkt 217001 • Use the Federal Rulemaking Portal (https://www.regulations.gov). Follow the instructions for submitting comments. Paper Comments • Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549–1090. All submissions should refer to File Number S7–12–09. This file number should be included on the subject line if e-mail is used. To help us process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (https://www.sec.gov/rules/ proposed.shtml ). Comments are also available for public inspection and copying in the Commission’s Public Reference Room, 100 F Street, NE, Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. All comments received will be posted without change; we do not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. FOR FURTHER INFORMATION CONTACT: John Harrington, Attorney-Adviser, or N. Sean Harrison, Special Counsel, Division of Corporation Finance, at (202) 551–3430, or Division of Corporation Finance, at (202) 551–3430, U.S. Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549–3628. SUPPLEMENTARY INFORMATION: We are proposing a new Rule 14a–20 and amendments to Schedule 14A1 under the Securities Exchange Act of 1934 (‘‘Exchange Act’’).2 I. Background The American Recovery and Reinvestment Act of 2009 (‘‘ARRA’’) was enacted on February 17, 2009.3 Section 7001 of the ARRA amended the executive compensation and corporate governance provisions of Section 111 of the Emergency Economic Stabilization Act of 2008 (‘‘EESA’’).4 Section 111(e) of the EESA,5 as amended, requires any CFR 240.14a–101. U.S.C. 78a et seq. 3 Pub. L. 111–5, Title II, 110 Stat. (2009). 4 12 U.S.C. 5221. 5 Section 111(e) of the EESA, as amended, states— (1) ANNUAL SHAREHOLDER APPROVAL OF EXECUTIVE COMPENSATION—Any proxy or consent or authorization for an annual or other meeting of the shareholders of any TARP recipient during the period in which any obligation arising from financial assistance provided under the TARP remains outstanding shall permit a separate PO 00000 1 17 2 15 Frm 00004 Fmt 4702 Sfmt 4702 entity that has received or will receive financial assistance under the Troubled Asset Relief Program (‘‘TARP’’) to ‘‘permit a separate shareholder vote to approve the compensation of executives, as disclosed pursuant to the compensation disclosure rules of the Commission (which disclosure shall include the compensation discussion and analysis, the compensation tables, and any related material).’’ 6 Companies that have received financial assistance under the TARP are required to provide this separate shareholder vote during the period in which any obligation arising from financial assistance provided under the TARP remains outstanding.7 The shareholder vote required by Section 111(e) of the EESA is not binding on the board of directors of a TARP recipient, and such vote will not be construed as overruling a board decision or as creating or implying any additional fiduciary duty by the board.8 The vote also will not be construed to restrict or limit the ability of shareholders to make proposals for inclusion in proxy materials related to executive compensation.9 shareholder vote to approve the compensation of executives, as disclosed pursuant to the compensation disclosure rules of the Commission (which disclosure shall include the compensation discussion and analysis, the compensation tables, and any related material). (2) NONBINDING VOTE—A shareholder vote described in paragraph (1) shall not be binding on the board of directors of a TARP recipient, and may not be construed as overruling a decision by such board, nor to create or imply any additional fiduciary duty by such board, nor shall such vote be construed to restrict or limit the ability of shareholders to make proposals for inclusion in proxy materials related to executive compensation. (3) DEADLINE FOR RULEMAKING—Not later than 1 year after the date of enactment of the American Recovery and Reinvestment Act of 2009, the Commission shall issue any final rules and regulations required by this subsection. 6 We do not believe this provision changes the Commission’s rules for a smaller reporting company that is a TARP recipient under the EESA with respect to the compensation discussion and analysis (‘‘CD&A’’) disclosure. Our compensation disclosure rules, as set forth in Item 402 of Regulation S–K [17 CFR 229.402], permit smaller reporting companies to provide scaled disclosure that does not include CD&A. 7 Section 111 of the EESA defines this period to not include any period during which the Federal Government ‘‘only holds warrants to purchase common stock of the TARP recipient.’’ See 12 U.S.C. 5221(a)(5). 8 Section 111(e)(2) of the EESA [12 U.S.C. 5221(e)(2)]. 9 Rule 14a–8 under the Exchange Act will continue to apply to shareholder proposals that relate to executive compensation. Rule 14a–8 provides shareholders with an opportunity to place a proposal in a company’s proxy materials for a vote at an annual or special meeting of shareholders. Under this rule, a company generally is required to include the proposal unless the shareholder has not complied with the rule’s procedural requirements or the proposal falls within one of the rule’s 13 substantive bases for exclusion. To date, the staff of E:\FR\FM\08JYP1.SGM 08JYP1 Federal Register / Vol. 74, No. 129 / Wednesday, July 8, 2009 / Proposed Rules II. Discussion of the Proposed Amendments mstockstill on DSKH9S0YB1PROD with PROPOSALS We are proposing new Rule 14a–20 under the Exchange Act to help implement the requirement under Section 111(e)(1) of the EESA that ‘‘TARP recipients’’ under Section 111(a)(3) of the EESA 10 provide a separate shareholder vote to approve the compensation of the company’s executives.11 Under proposed Rule 14a– 20, registrants that are TARP recipients would be required to provide this separate shareholder vote in proxies solicited during the period in which any obligation arising from financial assistance provided under the TARP remains outstanding. Proposed Rule 14a–20 would clarify that the separate shareholder vote required by Section 111(e)(1) of the EESA would only be required on a proxy solicited for an annual (or special meeting in lieu of the annual) meeting of security holders for which proxies will be solicited for the election of directors.12 We are proposing an instruction to new Rule 14a–20 to clarify that smaller reporting companies would not be required to provide a compensation discussion and analysis the Division of Corporation Finance has considered two requests in which TARP recipients requested the staff’s concurrence that, given the shareholder advisory vote provision in Section 111(e) of the EESA, the companies could rely on Rule 14a–8(i)(9) [17 CFR 240.14a–8(i)(9)] or Rule 14a–8(i)(10) [17 CFR 240.14a–8(i)(10)] to exclude from their proxy materials shareholder proposals that requested policies of holding annual shareholder advisory votes on executive compensation. The staff of the Division of Corporation Finance declined to concur with either request. See Bank of America Corp. (Mar. 11, 2009); CoBiz Financial Inc. (Mar. 25, 2009) (available at https://www.sec.gov/divisions/ corpfin/cf-noaction/2009_14a-8.shtml). 10 Section 111(a)(3) of the EESA defines TARP recipient as ‘‘any entity that has received or will receive financial assistance under the financial assistance provided under the TARP.’’ See 12 U.S.C. 5221(a)(3). 11 Section 111(e)(3) of the EESA requires the Commission to issue any final rules required by Section 111(e) within one year after the enactment of the ARRA. See 12 U.S.C. 5221(e)(3). 12 The Commission agrees with the view previously expressed by the Division of Corporation Finance that a separate shareholder vote on executive compensation is required only with respect to an 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. See Compliance and Disclosure Interpretations: American Recovery and Reinvestment Act of 2009 (Updated February 26, 2009), Question 1, available at https://www.sec.gov/ divisions/corpfin/guidance/arrainterp.htm. Although Section 111(e)(1) of the EESA refers to an annual ‘‘or other meeting of the shareholders,’’ the subsection is titled ‘‘Annual Shareholder Approval of Executive Compensation.’’ Proposed Rule 14a–20 is intended to result in TARP recipients conducting the required advisory vote annually in connection with the election of directors, in which case our rules call for disclosure of executive compensation. VerDate Nov<24>2008 17:19 Jul 07, 2009 Jkt 217001 in order to comply with the requirements of Rule 14a–20.13 We are also proposing an amendment to Item 20 of Schedule 14A that would be applicable to registrants that are TARP recipients and are required to provide a separate shareholder vote on executive compensation pursuant to Section 111(e)(1) of the EESA and proposed Rule 14a–20. Pursuant to this amendment, such registrants would be required to disclose in the proxy statement that they are providing a separate shareholder vote on executive compensation pursuant to the requirements of the EESA, and to briefly explain the general effect of the vote, such as whether the vote is nonbinding.14 Under our current disclosure rules, a company is required to report the results of the vote in its periodic report for the period in which the vote is taken.15 This includes the results of the vote required under the EESA and proposed Rule 14a–20. We are proposing in a separate release also considered by the Commission today to accelerate the filing schedule for reporting results of shareholder votes generally by moving the requirement from Forms 10–Q and 10–K to Form 8– K.16 If that proposal is adopted, it would apply to reporting results of the vote required by Rule 14a–20.17 It is our intent that the proposed Rule 14a-20 and the proposed amendments to Schedule 14A afford registrants that are TARP recipients adequate flexibility to note 6 above. are not proposing to require registrants to use any specific language or form of resolution. However, as stated in Section 111(e)(1) of the EESA, the vote must be to approve ‘‘the compensation of executives, as disclosed pursuant to the compensation disclosure rules of the Commission (which disclosure shall include the compensation discussion and analysis, the compensation tables, and any related material).’’ We believe that a vote to approve a proposal on a different subject matter, such as a vote to approve only compensation policies and procedures, would not satisfy the requirements of Section 111(e)(1) of the EESA or proposed Rule 14a–20. Likewise, a shareholder proposal that asks the company to adopt a policy providing for periodic, non-binding shareholder votes on executive compensation in the future would not satisfy the requirement of Section 111(e) of the EESA or proposed Rule 14a–20. Section 111(e) requires a vote to approve the compensation of executives. A vote to request a voting policy that would apply at future meetings would not satisfy the EESA or proposed Rule 14a–20. 15 See Item 4 of Part II of Exchange Act Form 10– Q [17 CFR 249.308a] and Item 4 of Part I of Exchange Act Form 10–K [17 CFR 249.310]. 16 17 CFR 249.308. 17 In the Proxy Disclosure and Solicitation Enhancements Release, the Commission is proposing amendments that would require reporting companies to disclose on Form 8–K the results of a shareholder vote, and to file that information within four business days after the end of the meeting at which the vote was held. PO 00000 13 See 14 We Frm 00005 Fmt 4702 Sfmt 4702 32475 meet their obligations under Section 111(e) of the EESA. At the same time, we believe that the proposed amendments, by helping to implement the requirements of Section 111(e) of the EESA in our proxy rules, would provide clarity for registrants that are TARP recipients regarding how they must comply with their obligations under Section 111(e) of the EESA. We also believe that a discussion of the reason why the registrant is providing a separate shareholder vote on the compensation of executives and an explanation of the effect of that vote would provide investors with information that would help them to make informed voting decisions. Rule 14a–6 under the Exchange Act generally requires registrants to file proxy statements in preliminary form at least ten calendar days before definitive proxy materials are first sent to shareholders, unless the items included for a shareholder vote in the proxy statement are limited to specified matters.18 During the time before final proxy materials are filed, our staff has the opportunity to comment on the disclosures and registrants are able to incorporate the staff’s comments in their final proxy materials. The matters that do not require filing of preliminary materials include various items that regularly arise at annual meetings, such as the election of directors, ratification of the selection of auditors, approval or ratification of certain employee benefits plans, and shareholder proposals under Rule 14a–8. Absent an amendment to Rule 14a–6, a proxy statement that includes the vote on executive compensation required by Section 111(e) of EESA and proposed Rule 14a-20 must be filed in preliminary form. We are not proposing to amend Rule 14a–6 at this time to add the vote required for TARP recipients to the list of items that do not trigger a preliminary filing. In light of the early stage of the development of disclosures under these requirements and the special policy considerations relating to this shareholder vote for TARP recipients, we believe it is appropriate to provide our staff the opportunity to comment on the disclosure before final proxy materials are filed. However, as indicated below, we are requesting comment on this issue. Request for Comment We request and encourage any interested person to submit comments regarding the proposed amendments described above. In particular, we solicit comment on the following questions: 18 17 E:\FR\FM\08JYP1.SGM CFR 240.14a–6(a). 08JYP1 32476 Federal Register / Vol. 74, No. 129 / Wednesday, July 8, 2009 / Proposed Rules • Should we include more specific requirements regarding the manner in which registrants that are TARP recipients should present the shareholder vote on executive compensation? For example, should we designate the specific language to be used and/or require TARP recipients to frame the shareholder vote to approve executive compensation in the form of a resolution? • Should we require registrants that are TARP recipients to disclose the reasons why they are providing for a separate shareholder vote on executive compensation and an explanation of the effect of that vote, as proposed? • Should we require any additional disclosures about TARP recipients or the requirements of Section 111(e) of the EESA to be included with the vote to approve executive compensation? If so, what disclosures should we consider? • Should we require any additional disclosures to be included with a TARP recipient’s compensation discussion and analysis or other disclosures provided under Item 402 of Regulation S–K? • Should we clarify by instruction, as proposed, that smaller reporting companies that are TARP recipients are not required to include a compensation discussion and analysis in their proxy statements in order to comply with our proposed amendments? • Should language be added to proposed Rule 14a–20 to indicate explicitly that, as required by Section 111(e) of the EESA, the separate shareholder vote on the compensation of executives would be a non-binding advisory vote, or is the statutory reference sufficient for this purpose? • Should we amend Rule 14a–6(a) under the Exchange Act so that registrants that are TARP recipients are not required to file a preliminary proxy statement as a consequence of providing a separate shareholder vote on executive compensation? mstockstill on DSKH9S0YB1PROD with PROPOSALS III. Paperwork Reduction Act A. Background The proposed amendments contain ‘‘collection of information’’ requirements within the meaning of the Paperwork Reduction Act of 1995 (‘‘PRA’’).19 We are submitting the proposed amendments to the Office of Management and Budget (‘‘OMB’’) for review in accordance with the PRA.20 The title for the collection of information is: ‘‘Schedule 14A’’ (OMB Control No. 3235–0059). 19 44 20 44 U.S.C. 3501 et seq. U.S.C. 3507(d) and 5 CFR 1320.11. VerDate Nov<24>2008 17:19 Jul 07, 2009 Jkt 217001 Schedule 14A was adopted under the Exchange Act and sets forth the disclosure requirements for proxy statements filed by U.S. issuers to help shareholders make informed voting decisions. The hours and costs associated with preparing, filing and sending the form constitute reporting and cost burdens imposed by each collection of information. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid OMB control number. Compliance with the proposed amendments by affected U.S. issuers would be mandatory. Responses to the information collections would not be kept confidential and there would be no mandatory retention period for the information disclosed. As discussed in more detail above, we are proposing a new Rule 14a–20 under the Exchange Act and an amendment to Item 20 of Schedule 14A. Rule 14a–20 would help implement the requirement under Section 111(e)(1) of the EESA to provide a separate shareholder vote to approve the compensation of executives. Pursuant to the proposed amendment to Item 20 of Schedule 14A, registrants required to provide a separate shareholder vote pursuant to new Rule 14a–20 would be required to disclose the EESA requirement to provide such a vote and the general effect of the vote. B. Burden and Cost Estimates Related to the Proposed Amendments We believe that the proposed Rule 14a–20 and amendments to Schedule 14A will result in only a modest increase in the burden and cost of preparing and filing a Schedule 14A because they will not cause TARP recipients to collect or disclose any significant additional information. Section 111(e) of the EESA already increased the burdens and costs for registrants that are TARP recipients by requiring a separate shareholder vote on executive compensation and already applied during the 2009 proxy season. Our proposed amendments address the EESA requirement in the context of the federal proxy rules, thereby creating only an incremental increase in the burdens and costs for such registrants. We believe the proposed amendments will remove uncertainty while still providing registrants that are TARP recipients adequate flexibility to comply with Section 111(e) of the EESA. For purposes of this analysis, we estimate the burden of disclosing the general effect of the vote and otherwise ensuring conformity with the federal proxy rules when complying with PO 00000 Frm 00006 Fmt 4702 Sfmt 4702 Section 111(e)(1) of the EESA will increase by one hour per registrant that is a TARP recipient. We estimate there are approximately 275 registrants that are TARP recipients with outstanding obligations that would be subject to our proposed amendments.21 Therefore, the total annual PRA burden attributable to the proposed rules is 275 hours. For proxy statements, consistent with our customary assumptions, we estimate that 75% of the burden of preparation is carried by the company internally and that 25% of the burden is carried by outside professionals retained by the company to review corporate disclosure at an average cost of $400 per hour.22 The portion of the burden carried by outside professionals is reflected as a cost, while the portion of the burden carried by the company internally is reflected in hours. Based on the foregoing, we calculated the additional annual compliance burdens resulting from the proposed amendments at 206.5 hours (this is 75% of the total 275 hours in increased burden carried by the company internally) and $27,500 (this is 25% of the total increased hourly burden carried by outside professionals and reflected as a cost). The current total annual burden hours and cost of Schedule 14A approved by the OMB is 555,683 hours and $63,709,987. Giving effect to the incremental increases in burden hours and costs as a result of the proposed amendments, the total annual burden hours and cost of Schedule 14A would be 555,889.5 hours and $63,737,487. C. Request for Comment Pursuant to 44 U.S.C. 3506(c)(2)(B), we request comment in order to: • Evaluate whether the proposed collections of information are necessary for the proper performance of the functions of the Commission, including whether the information will have practical utility; • Evaluate the accuracy of our estimate of the burden of the proposed collections of information; • Determine whether there are ways to enhance the quality, utility, and clarity of the information to be collected; • Evaluate whether there are ways to minimize the burden of the collections 21 Our staff made this estimate from publiclyavailable information about TARP recipients. The estimate is based on the number of TARP recipients that are subject to our proxy rules and that have not repaid their TARP obligations. 22 We estimate an hourly cost of $400 per hour for the service of outside professionals based on our consultations with several registrants and law firms and other persons who regularly assist registrants in preparing and filing proxy statements and related disclosures with the Commission. E:\FR\FM\08JYP1.SGM 08JYP1 Federal Register / Vol. 74, No. 129 / Wednesday, July 8, 2009 / Proposed Rules of information on those who respond, including through the use of automated collection techniques or other forms of information technology; and • Evaluate whether the proposed amendments will have any effects on any other collections of information not previously identified in this section. Any member of the public may direct to us any comments concerning the accuracy of these burden estimates and any suggestions for reducing the burdens. Persons who desire to submit comments on the collection of information requirements should direct their comments to the OMB, Attention: Desk Officer for the Securities and Exchange Commission, Office of Information and Regulatory Affairs, Washington, DC 20503, and send a copy of the comments to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549–1090, with reference to File No. S7–12–09. Requests for materials submitted to the OMB by us with regard to these collections of information should be in writing, refer to File No. S7–12–09 and be submitted to the Securities and Exchange Commission, Office of Investor Education and Advocacy, 100 F Street, NE., Washington, DC 20549– 0213. Because OMB is required to make a decision concerning the collections of information between 30 and 60 days after publication, your comments are best assured of having their full effect if OMB receives them within 30 days of publication. IV. Cost-Benefit Analysis We are sensitive to the costs and benefits of the proposed amendments. In this section, we examine the benefits and costs of our proposed amendments. We request that commenters provide views and supporting information as to the benefits and costs associated with the proposals. We seek estimates of these costs and benefits, as well as any costs and benefits not already identified.23 mstockstill on DSKH9S0YB1PROD with PROPOSALS A. Benefits We are proposing amendments to the federal proxy rules to help implement 23 The cost-benefit analysis in this section addresses the costs and benefits of the proposed amendments. The analysis does not, however, address the costs and benefits of the requirement in Section 111(e)(1) of the EESA that TARP recipients conduct a separate shareholder vote on executive compensation. While the proposed amendments set forth the manner in which registrants that are TARP recipients would implement this requirement when complying with the federal proxy rules, such registrants are already subject to the provisions of Section 111(e)(1) of the EESA and thus we are only addressing the incremental costs and benefits of the proposed amendments. VerDate Nov<24>2008 17:19 Jul 07, 2009 Jkt 217001 the requirement in Section 111(e)(1) of the EESA that TARP recipients provide a separate shareholder vote to approve the compensation of executives. Under the proposed amendments, this separate shareholder vote would be required when registrants that are TARP recipients solicit proxies during the period in which any obligation arising from financial assistance provided under the TARP remains outstanding, and the solicitation relates to an annual meeting (or a special meeting in lieu of an annual meeting) for which proxies will be solicited for the election of directors. Companies required to provide such a separate shareholder vote would also be required to disclose in their proxy statements the EESA requirement to provide such a vote, and to briefly explain the general effect of the vote. We believe the proposed amendments will benefit registrants that are TARP recipients by clarifying how they must comply with the requirements of Section 111(e)(1) of the EESA in the context of the federal proxy rules. The proposed amendments eliminate uncertainty that may exist among TARP recipients and other market participants regarding what is necessary under the Commission’s proxy rules when conducting a shareholder vote required under Section 111(e) of the EESA. In addition to these benefits, we believe the proposed amendments allow TARP recipients adequate flexibility under the proxy rules to comply with the requirements of the EESA. By providing clarity while maintaining adequate flexibility, we believe the proposed amendments could reduce the amount of management time and legal expenses necessary to ensure that registrants that are TARP recipients comply with their obligations under both the EESA and the federal proxy rules. This would benefit TARP recipients and their shareholders. We believe the proposed amendments will benefit investors by resulting in clear disclosure about the requirements of Section 111(e)(1) of the EESA as applied to Exchange Act registrants. When a separate shareholder vote on the compensation of executives is required by the EESA, proposed Rule 14a–20 would specify and clarify that requirement in the context of the federal proxy rules. By doing so, we believe Rule 14a–20 would promote better compliance with the requirements of Section 111(e)(1) of the EESA when registrants that are TARP recipients conduct solicitations subject to our proxy rules. The proposed amendments to Schedule 14A would require disclosure about the EESA requirement PO 00000 Frm 00007 Fmt 4702 Sfmt 4702 32477 to provide a separate shareholder vote and the general effects of such a vote. Together, the proposed amendments are intended to provide useful, comparable and consistent information to assist an informed voting decision when registrants that are TARP recipients present to investors the advisory vote on executive compensation required pursuant to Section 111(e)(1) of the EESA. The specification and clarification of the requirement in our proposed rule would also help provide certainty about the nature of the TARP recipient’s responsibility to hold the advisory vote, making it easier for companies to comply. B. Costs We believe the proposed amendments would not add any significant costs to those already created by the requirements of Section 111(e)(1) of the EESA and our proxy rules. The proposed amendments are intended to help implement the existing substantive EESA requirement in the context of the federal proxy rules. While our proposed amendments to Schedule 14A would require certain disclosures not explicitly required by EESA, we believe any incremental costs imposed by our proposed amendments would be minimal. For purposes of the PRA, we estimate the total annual incremental cost of the amendments to be 275 hours. We request comment on the amount of any additional costs issuers may incur as a result of the proposed amendments. V. Small Business Regulatory Enforcement Fairness Act For purposes of the Small Business Regulatory Enforcement Fairness Act of 1996, or ‘‘SBREFA,’’ 24 we solicit data to determine whether the proposals constitute a ‘‘major’’ rule. Under SBREFA, a rule is considered ‘‘major’’ where, if adopted, it results or is likely to result in: • An annual effect on the economy of $100 million or more (either in the form of an increase or a decrease); • A major increase in costs or prices for consumers or individual industries; or • Significant adverse effects on competition, investment or innovation. We request comment on the potential impact of the proposed amendments on the U.S. economy on an annual basis, any potential increase in costs or prices for consumers or individual industries, and any potential effect on competition, investment or innovation. Commenters are requested to provide empirical data 24 5 E:\FR\FM\08JYP1.SGM U.S.C. 603. 08JYP1 32478 Federal Register / Vol. 74, No. 129 / Wednesday, July 8, 2009 / Proposed Rules mstockstill on DSKH9S0YB1PROD with PROPOSALS and other factual support for their views if possible. VI. Consideration of Impact on the Economy, Burden on Competition and Promotion of Efficiency, Competition and Capital Formation Section 23(a)(2) of the Exchange Act 25 also requires us, when adopting rules under the Exchange Act, to consider the impact that any new rule would have on competition. Section 23(a)(2) prohibits us from adopting any rule that would impose a burden on competition not necessary or appropriate in furtherance of the purposes of the Exchange Act. In addition, Section 3(f) 26 of the Exchange Act requires us, when engaging in rulemaking where we are required to consider or determine whether an action is necessary or appropriate in the public interest, to also consider whether the action will promote efficiency, competition, and capital formation. We believe the proposed amendments would benefit registrants that are TARP recipients and their shareholders by providing certainty regarding how registrants that are TARP recipients must comply with the EESA requirement to hold an advisory vote on executive compensation in the context of the federal proxy rules, while maintaining adequate flexibility to comply with this requirement. The certainty should promote efficiency. The proposed amendments also would help ensure that shareholders receive disclosure regarding the required vote and the nature of a registrant’s responsibilities to hold the vote under the EESA. As discussed in greater detail above, we believe these benefits would be achieved without imposing any significant additional burdens on registrants that are TARP recipients. We do not anticipate any effect on competition or capital formation. We do believe the rules will make compliance with EESA more efficient. We request comment on whether the proposed amendments, if adopted, would impose a burden on competition. We also request comment on whether the proposed amendments, if adopted, would promote efficiency, competition, and capital formation. Commenters are requested to provide empirical data and other factual support for their view to the extent possible. VII. Regulatory Flexibility Act Certification The Commission hereby certifies pursuant to 5 U.S.C. 605(b), that the amendments contained in this release, if adopted, would not have a significant economic impact on a substantial number of small entities. Rule 0–10 under the Exchange Act defines small entities for these purposes as those with total assets of $5 million or less on the last day of their most recent fiscal year.27 The proposed amendments would only impact TARP recipients with a class of securities registered pursuant to Section 12 of the Exchange Act and thus subject to the federal proxy rules.28 We believe no TARP recipients that are required to comply with our proxy rules are small entities. In addition, if any small entities become subject to our proposed amendments, we do not believe the proposed amendments would have a significant economic impact on them. Any small entity subject to our proposed amendments would already be subject to the requirements of Section 111(e)(1) of the EESA. Further, we do not believe the EESA requires ‘‘smaller reporting companies’’ to provide a compensation discussion and analysis. As discussed in greater detail above, we do not believe our proposed rules impose a significant additional cost. For these reasons, the proposed amendments should not have a significant economic impact on a substantial number of small entities. We solicit written comments regarding this certification. We request that commenters describe the nature of any impact on small entities and provide empirical data to support the extent of the impact. VIII. Statutory Authority and Text of the Proposed Amendments The amendments described in this release are being proposed under the authority set forth in Section 111(e) of the Emergency Economic Stabilization Act of 2008 (12 U.S.C. 5221(e)) and Sections 14(a) and 23(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78n(a) and 78w(a)). List of Subjects in 17 CFR Part 240 Reporting and recordkeeping requirements, Securities. * * * * * 2. Add § 240.14a–20 to read as follows: § 240.14a–20 Shareholder Approval of Executive Compensation of TARP Recipients. If a solicitation is made by a registrant that is a TARP recipient, as defined in section 111(a)(3) of the Emergency Economic Stabilization Act of 2008 (12 U.S.C. 5221(a)(3)), during the period in which any obligation arising from financial assistance provided under the TARP, as defined in section 3(8) of the Emergency Economic Stabilization Act of 2008 (12 U.S.C. 5202(8)), remains outstanding and the solicitation relates to an annual (or special meeting in lieu of the annual) meeting of security holders for which proxies will be solicited for the election of directors, as required pursuant to section 111(e)(1) of the Emergency Economic Stabilization Act of 2008 (12 U.S.C. 5221(e)(1)), the registrant shall provide a separate shareholder vote to approve the compensation of executives, as disclosed pursuant to Item 402 of Regulation S–K (§ 229.402 of this chapter), including the compensation discussion and analysis, the compensation tables, and any related material. Note to § 240.14a–20: TARP recipients that are smaller reporting companies entitled to provide scaled disclosure pursuant to Item 402(l) of Regulation S–K are not required to include a compensation discussion and analysis in their proxy statements in order to comply with this section. In the case of these smaller reporting companies, the required vote must be to approve the compensation of executives as disclosed pursuant to Item 402(m) through (r) of Regulation S–K. For the reasons set out in the preamble, the Commission proposes to amend title 17, chapter II, of the Code of Federal Regulations as follows: § 240.14a–101 Schedule 14A. Information required in Proxy Statement. Schedule 14A Information * * * * * Item 20. Other proposed action. * * * Registrants required to provide a 27 17 CFR 240.0–10. 28 See 17 CFR 240.14a-2. Jkt 217001 Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z–2, 77z–3, 77eee, 77ggg, 77nnn, 77sss, 77ttt, 78c, 78d, 78e, 78f, 78g, 78i, 78j, 78j–1, 78k, 78k–1, 78l, 78m, 78n, 78o, 78p, 78q, 78s, 78u–5, 78w, 78x, 78ll, 78mm, 80a– 20, 80a–23, 80a–29, 80a–37, 80b–3, 80b–4, 80b–11, and 7201 et seq., 18 U.S.C. 1350, and 12 U.S.C. 5221(e)(3), unless otherwise noted. 3. Amend § 240.14a–101 by adding a sentence at the end of Item 20 to read as follows: U.S.C. 78w(a). 26 15 U.S.C. 78c(f). 17:19 Jul 07, 2009 1. The general authority citation for Part 240 is revised to read as follows: Text of the Proposed Amendments 25 15 VerDate Nov<24>2008 PART 240—GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF 1934 PO 00000 Frm 00008 Fmt 4702 Sfmt 4702 E:\FR\FM\08JYP1.SGM 08JYP1 Federal Register / Vol. 74, No. 129 / Wednesday, July 8, 2009 / Proposed Rules separate shareholder vote pursuant to section 111(e)(1) of the Emergency Economic Stabilization Act of 2008 (12 U.S.C. 5221(e)(1)) and § 240.14a–20 shall disclose that they are providing such a vote as required pursuant to the Emergency Economic Stabilization Act of 2008, and briefly explain the general effect of the vote. * * * * * July 1, 2009. By the Commission. Elizabeth M. Murphy, Secretary. [FR Doc. E9–16037 Filed 7–7–09; 8:45 am] BILLING CODE P ENVIRONMENTAL PROTECTION AGENCY 40 CFR Parts 80, 85, 86, 94, 1027, 1033, 1039, 1042, 1043, 1045, 1048, 1051, 1054, 1060, 1065, and 1068 [EPA–HQ–OAR–2007–0121; FRL–8927–6] RIN 2060–AO38 Public Hearing for the Category 3 Marine Rule mstockstill on DSKH9S0YB1PROD with PROPOSALS AGENCY: Environmental Protection Agency (EPA). ACTION: Notice of public hearings. SUMMARY: The EPA is announcing a public hearing to be held for the proposed rule ‘‘Control of Emissions from New Marine Compression-Ignition Engines at or Above 30 Liters per Cylinder’’ (the proposed rule is hereinafter referred to as the ‘‘Category 3 Marine Rule’’), which will be published separately in the Federal Register. There will be two hearings, one held in New York, NY, on August 4, 2009, and one held in Long Beach, CA on August 6, 2009. In a separate notice of proposed rulemaking, EPA is proposing emission standards for new marine diesel engines with per cylinder displacement at or above 30 liters (called Category 3 marine diesel engines) installed on U.S. vessels, under section 213 of the Clean Air Act (CAA or ‘‘the Act’’). The proposed engine standards are equivalent to the nitrogen oxides (NOX) limits recently adopted in the amendments to Annex VI to the International Convention for the Prevention of Pollution from Ships (MARPOL Annex VI) and are based on the position advanced by the United States Government as part of those international negotiations. The nearterm standards for newly-built engines would apply beginning in 2011. Longterm standards would begin in 2016 and VerDate Nov<24>2008 17:19 Jul 07, 2009 Jkt 217001 are based on the application of highefficiency aftertreatment technology. We are also proposing a change to our diesel fuel program that would forbid the production and sale of marine fuel oil above 1,000 ppm sulfur for use in the waters within the proposed U.S. ECA and internal U.S. waters and allow for the production and sale of 1,000 ppm sulfur fuel for use in Category 3 marine vessels. The proposal is part of a coordinated strategy to ensure that all ships that affect U.S. air quality meet stringent NOX and fuel sulfur requirements. In addition, on March 27, 2009, the U.S. Government forwarded a proposal to the International Maritime Organization (IMO) to amend MARPOL Annex VI to designate an Emission Control Area (ECA) off U.S. coasts. If this proposed amendment is not timely adopted by IMO, we intend to take supplemental action to control emissions from vessels affecting U.S. air quality. The proposed regulations also include technical amendments to our motor vehicle and nonroad engine regulations. Many of these changes involve minor adjustments or corrections to our recently finalized rule for new nonroad spark-ignition engines, or adjustments to other regulatory provisions to align with this recently finalized rule. Our coordinated strategy also includes proposed regulations to implement MARPOL Annex VI pursuant to the Act to Prevent Pollution from Ships. DATES: The public hearings will be held on Tuesday, August 4, 2009 in New York, NY, and on Thursday, August 6, 2009, in Long Beach, CA. If you would like to speak at a public hearing, please notify the contact person listed under FOR FURTHER INFORMATION CONTACT at least ten days before the hearing. See SUPPLEMENTARY INFORMATION for other detailed information regarding the public hearings for the Category 3 Marine Rule. ADDRESSES: The hearings will be held at the following two locations: New York Marriott Downtown, 85 West Street, New York, NY 10006; and Westin Long Beach, 333 East Ocean Boulevard, Long Beach, CA 90802. Written comments on the proposed rule may also be submitted to EPA electronically, by mail, by facsimile, or through hand delivery/ courier. Please refer to the notice of proposed rulemaking for the addresses and detailed instructions for submitting written comments. FOR FURTHER INFORMATION CONTACT: Amy Kopin, U.S. EPA, Office of Transportation and Air Quality, Assessment and Standards Division (ASD), Environmental Protection PO 00000 Frm 00009 Fmt 4702 Sfmt 4702 32479 Agency, 2000 Traverwood Drive, Ann Arbor, MI 48105; telephone number: (734) 214–4417; fax number: (734) 214– 4050; e-mail address: Kopin.Amy@epa.gov; or Assessment and Standards Division Hotline, telephone number: (734) 214–4636. SUPPLEMENTARY INFORMATION: The proposal for which EPA is holding the public hearing will be published separately in the Federal Register. A pre-publication copy of the notice of proposed rulemaking is available on the following Web site: https://www.epa.gov/ otaq/oceanvessels.htm. Public Hearings: The public hearings will provide interested parties the opportunity to present data, views, or arguments concerning the proposed rule. The EPA may ask clarifying questions during the oral presentations, but will not respond to the presentations at that time. Written statements and supporting information submitted during the comment period will be considered with the same weight as any oral comments and supporting information presented at the public hearings. Written comments must be received by the last day of the comment period, as specified in the proposal of the Category 3 Marine Rule. The public hearings will be held on August 4, 2009 in New York, and August 6, 2009, in Long Beach, CA. These hearings will both start at 10 a.m. local time and continue until everyone has had a chance to speak. If you would like to speak at a public hearing, please notify the contact person listed under FOR FURTHER INFORMATION CONTACT at least ten days before the hearing. Verbatim transcripts of the hearings and written statements will be included in the rulemaking docket. How Can I Get Copies of This Document, the Proposed Rule, and Other Related Information? The EPA has established a docket for this action under Docket ID No. EPA– HQ–OAR–2007–0121. When the proposed rule is published in the Federal Register, a complete set of documents related to the proposal will be available for public inspection at the EPA Docket Center, located at 1301 Constitution Avenue, NW., Room 3334, Washington, DC, between 8:30 a.m. and 4:30 p.m., Monday through Friday, excluding legal holidays. A reasonable fee may be charged for copying. Documents are also available through the electronic docket system at https:// www.regulations.gov. Please refer to the notice of proposed rulemaking for detailed information on accessing information related to the proposal. E:\FR\FM\08JYP1.SGM 08JYP1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 74, Number 129 (Wednesday, July 8, 2009)]
[Proposed Rules]
[Pages 32474-32479]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-16037]

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SECURITIES AND EXCHANGE COMMISSION

17 CFR PART 240

[Release No. 34-60218; File No. S7-12-09]
RIN 3235-AK31

Shareholder Approval of Executive Compensation of TARP Recipients

AGENCY: Securities and Exchange Commission.

ACTION: Proposed rule.

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SUMMARY: We are proposing amendments to the proxy rules under the
Securities Exchange Act of 1934 to set forth certain requirements for
U.S. registrants subject to Section 111(e) of the Emergency Economic
Stabilization Act of 2008. Section 111(e) of the Emergency Economic
Stabilization Act of 2008 requires companies that have received
financial assistance under the Troubled Asset Relief Program (``TARP'')
to permit a separate shareholder advisory vote to approve the
compensation of executives, as disclosed pursuant to the compensation
disclosure rules of the Commission, during the period in which any
obligation arising from financial assistance provided under the TARP
remains outstanding. The proposed amendments are intended to help
implement this requirement by specifying and clarifying it in the
context of the federal proxy rules.

DATES: Comments should be received on or before September 8, 2009.

ADDRESSES: Comments may be submitted by any of the following methods:

Electronic Comments

Use the Commission's Internet comment form (https://www.sec.gov/rules/proposed.shtml );
Send an e-mail to rule-comments@sec.gov. Please include
File Number S7-12-09 on the subject line; or
Use the Federal Rulemaking Portal (https://www.regulations.gov). Follow the instructions for submitting comments.

Paper Comments

Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.

All submissions should refer to File Number S7-12-09. This file number
should be included on the subject line if e-mail is used. To help us
process and review your comments more efficiently, please use only one
method. The Commission will post all comments on the Commission's
Internet Web site (https://www.sec.gov/rules/proposed.shtml ). Comments
are also available for public inspection and copying in the
Commission's Public Reference Room, 100 F Street, NE, Washington, DC
20549, on official business days between the hours of 10 a.m. and 3
p.m. All comments received will be posted without change; we do not
edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly.

FOR FURTHER INFORMATION CONTACT: John Harrington, Attorney-Adviser, or
N. Sean Harrison, Special Counsel, Division of Corporation Finance, at
(202) 551-3430, or Division of Corporation Finance, at (202) 551-3430,
U.S. Securities and Exchange Commission, 100 F Street, NE., Washington,
DC 20549-3628.

SUPPLEMENTARY INFORMATION: We are proposing a new Rule 14a-20 and
amendments to Schedule 14A\1\ under the Securities Exchange Act of 1934
(``Exchange Act'').\2\
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\1\ 17 CFR 240.14a-101.
\2\ 15 U.S.C. 78a et seq.
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I. Background

The American Recovery and Reinvestment Act of 2009 (``ARRA'') was
enacted on February 17, 2009.\3\ Section 7001 of the ARRA amended the
executive compensation and corporate governance provisions of Section
111 of the Emergency Economic Stabilization Act of 2008 (``EESA'').\4\
Section 111(e) of the EESA,\5\ as amended, requires any entity that has
received or will receive financial assistance under the Troubled Asset
Relief Program (``TARP'') to ``permit a separate shareholder vote to
approve the compensation of executives, as disclosed pursuant to the
compensation disclosure rules of the Commission (which disclosure shall
include the compensation discussion and analysis, the compensation
tables, and any related material).'' \6\ Companies that have received
financial assistance under the TARP are required to provide this
separate shareholder vote during the period in which any obligation
arising from financial assistance provided under the TARP remains
outstanding.\7\ The shareholder vote required by Section 111(e) of the
EESA is not binding on the board of directors of a TARP recipient, and
such vote will not be construed as overruling a board decision or as
creating or implying any additional fiduciary duty by the board.\8\ The
vote also will not be construed to restrict or limit the ability of
shareholders to make proposals for inclusion in proxy materials related
to executive compensation.\9\
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\3\ Pub. L. 111-5, Title II, 110 Stat. (2009).
\4\ 12 U.S.C. 5221.
\5\ Section 111(e) of the EESA, as amended, states--
(1) ANNUAL SHAREHOLDER APPROVAL OF EXECUTIVE COMPENSATION--Any
proxy or consent or authorization for an annual or other meeting of
the shareholders of any TARP recipient during the period in which
any obligation arising from financial assistance provided under the
TARP remains outstanding shall permit a separate shareholder vote to
approve the compensation of executives, as disclosed pursuant to the
compensation disclosure rules of the Commission (which disclosure
shall include the compensation discussion and analysis, the
compensation tables, and any related material).
(2) NONBINDING VOTE--A shareholder vote described in paragraph
(1) shall not be binding on the board of directors of a TARP
recipient, and may not be construed as overruling a decision by such
board, nor to create or imply any additional fiduciary duty by such
board, nor shall such vote be construed to restrict or limit the
ability of shareholders to make proposals for inclusion in proxy
materials related to executive compensation.
(3) DEADLINE FOR RULEMAKING--Not later than 1 year after the
date of enactment of the American Recovery and Reinvestment Act of
2009, the Commission shall issue any final rules and regulations
required by this subsection.
\6\ We do not believe this provision changes the Commission's
rules for a smaller reporting company that is a TARP recipient under
the EESA with respect to the compensation discussion and analysis
(``CD&A'') disclosure. Our compensation disclosure rules, as set
forth in Item 402 of Regulation S-K [17 CFR 229.402], permit smaller
reporting companies to provide scaled disclosure that does not
include CD&A.
\7\ Section 111 of the EESA defines this period to not include
any period during which the Federal Government ``only holds warrants
to purchase common stock of the TARP recipient.'' See 12 U.S.C.
5221(a)(5).
\8\ Section 111(e)(2) of the EESA [12 U.S.C. 5221(e)(2)].
\9\ Rule 14a-8 under the Exchange Act will continue to apply to
shareholder proposals that relate to executive compensation. Rule
14a-8 provides shareholders with an opportunity to place a proposal
in a company's proxy materials for a vote at an annual or special
meeting of shareholders. Under this rule, a company generally is
required to include the proposal unless the shareholder has not
complied with the rule's procedural requirements or the proposal
falls within one of the rule's 13 substantive bases for exclusion.
To date, the staff of the Division of Corporation Finance has
considered two requests in which TARP recipients requested the
staff's concurrence that, given the shareholder advisory vote
provision in Section 111(e) of the EESA, the companies could rely on
Rule 14a-8(i)(9) [17 CFR 240.14a-8(i)(9)] or Rule 14a-8(i)(10) [17
CFR 240.14a-8(i)(10)] to exclude from their proxy materials
shareholder proposals that requested policies of holding annual
shareholder advisory votes on executive compensation. The staff of
the Division of Corporation Finance declined to concur with either
request. See Bank of America Corp. (Mar. 11, 2009); CoBiz Financial
Inc. (Mar. 25, 2009) (available at https://www.sec.gov/divisions/corpfin/cf-noaction/2009_14a-8.shtml).

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[[Page 32475]]

II. Discussion of the Proposed Amendments

We are proposing new Rule 14a-20 under the Exchange Act to help
implement the requirement under Section 111(e)(1) of the EESA that
``TARP recipients'' under Section 111(a)(3) of the EESA \10\ provide a
separate shareholder vote to approve the compensation of the company's
executives.\11\ Under proposed Rule 14a-20, registrants that are TARP
recipients would be required to provide this separate shareholder vote
in proxies solicited during the period in which any obligation arising
from financial assistance provided under the TARP remains outstanding.
Proposed Rule 14a-20 would clarify that the separate shareholder vote
required by Section 111(e)(1) of the EESA would only be required on a
proxy solicited for an annual (or special meeting in lieu of the
annual) meeting of security holders for which proxies will be solicited
for the election of directors.\12\ We are proposing an instruction to
new Rule 14a-20 to clarify that smaller reporting companies would not
be required to provide a compensation discussion and analysis in order
to comply with the requirements of Rule 14a-20.\13\
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\10\ Section 111(a)(3) of the EESA defines TARP recipient as
``any entity that has received or will receive financial assistance
under the financial assistance provided under the TARP.'' See 12
U.S.C. 5221(a)(3).
\11\ Section 111(e)(3) of the EESA requires the Commission to
issue any final rules required by Section 111(e) within one year
after the enactment of the ARRA. See 12 U.S.C. 5221(e)(3).
\12\ The Commission agrees with the view previously expressed by
the Division of Corporation Finance that a separate shareholder vote
on executive compensation is required only with respect to an 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. See Compliance and Disclosure Interpretations: American
Recovery and Reinvestment Act of 2009 (Updated February 26, 2009),
Question 1, available at https://www.sec.gov/divisions/corpfin/guidance/arrainterp.htm. Although Section 111(e)(1) of the EESA
refers to an annual ``or other meeting of the shareholders,'' the
subsection is titled ``Annual Shareholder Approval of Executive
Compensation.'' Proposed Rule 14a-20 is intended to result in TARP
recipients conducting the required advisory vote annually in
connection with the election of directors, in which case our rules
call for disclosure of executive compensation.
\13\ See note 6 above.
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We are also proposing an amendment to Item 20 of Schedule 14A that
would be applicable to registrants that are TARP recipients and are
required to provide a separate shareholder vote on executive
compensation pursuant to Section 111(e)(1) of the EESA and proposed
Rule 14a-20. Pursuant to this amendment, such registrants would be
required to disclose in the proxy statement that they are providing a
separate shareholder vote on executive compensation pursuant to the
requirements of the EESA, and to briefly explain the general effect of
the vote, such as whether the vote is non-binding.\14\ Under our
current disclosure rules, a company is required to report the results
of the vote in its periodic report for the period in which the vote is
taken.\15\ This includes the results of the vote required under the
EESA and proposed Rule 14a-20. We are proposing in a separate release
also considered by the Commission today to accelerate the filing
schedule for reporting results of shareholder votes generally by moving
the requirement from Forms 10-Q and 10-K to Form 8-K.\16\ If that
proposal is adopted, it would apply to reporting results of the vote
required by Rule 14a-20.\17\
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\14\ We are not proposing to require registrants to use any
specific language or form of resolution. However, as stated in
Section 111(e)(1) of the EESA, the vote must be to approve ``the
compensation of executives, as disclosed pursuant to the
compensation disclosure rules of the Commission (which disclosure
shall include the compensation discussion and analysis, the
compensation tables, and any related material).'' We believe that a
vote to approve a proposal on a different subject matter, such as a
vote to approve only compensation policies and procedures, would not
satisfy the requirements of Section 111(e)(1) of the EESA or
proposed Rule 14a-20.
Likewise, a shareholder proposal that asks the company to adopt
a policy providing for periodic, non-binding shareholder votes on
executive compensation in the future would not satisfy the
requirement of Section 111(e) of the EESA or proposed Rule 14a-20.
Section 111(e) requires a vote to approve the compensation of
executives. A vote to request a voting policy that would apply at
future meetings would not satisfy the EESA or proposed Rule 14a-20.
\15\ See Item 4 of Part II of Exchange Act Form 10-Q [17 CFR
249.308a] and Item 4 of Part I of Exchange Act Form 10-K [17 CFR
249.310].
\16\ 17 CFR 249.308.
\17\ In the Proxy Disclosure and Solicitation Enhancements
Release, the Commission is proposing amendments that would require
reporting companies to disclose on Form 8-K the results of a
shareholder vote, and to file that information within four business
days after the end of the meeting at which the vote was held.
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It is our intent that the proposed Rule 14a-20 and the proposed
amendments to Schedule 14A afford registrants that are TARP recipients
adequate flexibility to meet their obligations under Section 111(e) of
the EESA. At the same time, we believe that the proposed amendments, by
helping to implement the requirements of Section 111(e) of the EESA in
our proxy rules, would provide clarity for registrants that are TARP
recipients regarding how they must comply with their obligations under
Section 111(e) of the EESA. We also believe that a discussion of the
reason why the registrant is providing a separate shareholder vote on
the compensation of executives and an explanation of the effect of that
vote would provide investors with information that would help them to
make informed voting decisions.
Rule 14a-6 under the Exchange Act generally requires registrants to
file proxy statements in preliminary form at least ten calendar days
before definitive proxy materials are first sent to shareholders,
unless the items included for a shareholder vote in the proxy statement
are limited to specified matters.\18\ During the time before final
proxy materials are filed, our staff has the opportunity to comment on
the disclosures and registrants are able to incorporate the staff's
comments in their final proxy materials. The matters that do not
require filing of preliminary materials include various items that
regularly arise at annual meetings, such as the election of directors,
ratification of the selection of auditors, approval or ratification of
certain employee benefits plans, and shareholder proposals under Rule
14a-8.
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\18\ 17 CFR 240.14a-6(a).
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Absent an amendment to Rule 14a-6, a proxy statement that includes
the vote on executive compensation required by Section 111(e) of EESA
and proposed Rule 14a-20 must be filed in preliminary form. We are not
proposing to amend Rule 14a-6 at this time to add the vote required for
TARP recipients to the list of items that do not trigger a preliminary
filing. In light of the early stage of the development of disclosures
under these requirements and the special policy considerations relating
to this shareholder vote for TARP recipients, we believe it is
appropriate to provide our staff the opportunity to comment on the
disclosure before final proxy materials are filed. However, as
indicated below, we are requesting comment on this issue.

Request for Comment

We request and encourage any interested person to submit comments
regarding the proposed amendments described above. In particular, we
solicit comment on the following questions:

[[Page 32476]]

Should we include more specific requirements regarding the
manner in which registrants that are TARP recipients should present the
shareholder vote on executive compensation? For example, should we
designate the specific language to be used and/or require TARP
recipients to frame the shareholder vote to approve executive
compensation in the form of a resolution?
Should we require registrants that are TARP recipients to
disclose the reasons why they are providing for a separate shareholder
vote on executive compensation and an explanation of the effect of that
vote, as proposed?
Should we require any additional disclosures about TARP
recipients or the requirements of Section 111(e) of the EESA to be
included with the vote to approve executive compensation? If so, what
disclosures should we consider?
Should we require any additional disclosures to be
included with a TARP recipient's compensation discussion and analysis
or other disclosures provided under Item 402 of Regulation S-K?
Should we clarify by instruction, as proposed, that
smaller reporting companies that are TARP recipients are not required
to include a compensation discussion and analysis in their proxy
statements in order to comply with our proposed amendments?
Should language be added to proposed Rule 14a-20 to
indicate explicitly that, as required by Section 111(e) of the EESA,
the separate shareholder vote on the compensation of executives would
be a non-binding advisory vote, or is the statutory reference
sufficient for this purpose?
Should we amend Rule 14a-6(a) under the Exchange Act so
that registrants that are TARP recipients are not required to file a
preliminary proxy statement as a consequence of providing a separate
shareholder vote on executive compensation?

III. Paperwork Reduction Act

A. Background

The proposed amendments contain ``collection of information''
requirements within the meaning of the Paperwork Reduction Act of 1995
(``PRA'').\19\ We are submitting the proposed amendments to the Office
of Management and Budget (``OMB'') for review in accordance with the
PRA.\20\ The title for the collection of information is:
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\19\ 44 U.S.C. 3501 et seq.
\20\ 44 U.S.C. 3507(d) and 5 CFR 1320.11.
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``Schedule 14A'' (OMB Control No. 3235-0059).
Schedule 14A was adopted under the Exchange Act and sets forth the
disclosure requirements for proxy statements filed by U.S. issuers to
help shareholders make informed voting decisions. The hours and costs
associated with preparing, filing and sending the form constitute
reporting and cost burdens imposed by each collection of information.
An agency may not conduct or sponsor, and a person is not required to
respond to, a collection of information unless it displays a currently
valid OMB control number. Compliance with the proposed amendments by
affected U.S. issuers would be mandatory. Responses to the information
collections would not be kept confidential and there would be no
mandatory retention period for the information disclosed.
As discussed in more detail above, we are proposing a new Rule 14a-
20 under the Exchange Act and an amendment to Item 20 of Schedule 14A.
Rule 14a-20 would help implement the requirement under Section
111(e)(1) of the EESA to provide a separate shareholder vote to approve
the compensation of executives. Pursuant to the proposed amendment to
Item 20 of Schedule 14A, registrants required to provide a separate
shareholder vote pursuant to new Rule 14a-20 would be required to
disclose the EESA requirement to provide such a vote and the general
effect of the vote.

B. Burden and Cost Estimates Related to the Proposed Amendments

We believe that the proposed Rule 14a-20 and amendments to Schedule
14A will result in only a modest increase in the burden and cost of
preparing and filing a Schedule 14A because they will not cause TARP
recipients to collect or disclose any significant additional
information. Section 111(e) of the EESA already increased the burdens
and costs for registrants that are TARP recipients by requiring a
separate shareholder vote on executive compensation and already applied
during the 2009 proxy season. Our proposed amendments address the EESA
requirement in the context of the federal proxy rules, thereby creating
only an incremental increase in the burdens and costs for such
registrants. We believe the proposed amendments will remove uncertainty
while still providing registrants that are TARP recipients adequate
flexibility to comply with Section 111(e) of the EESA.
For purposes of this analysis, we estimate the burden of disclosing
the general effect of the vote and otherwise ensuring conformity with
the federal proxy rules when complying with Section 111(e)(1) of the
EESA will increase by one hour per registrant that is a TARP recipient.
We estimate there are approximately 275 registrants that are TARP
recipients with outstanding obligations that would be subject to our
proposed amendments.\21\ Therefore, the total annual PRA burden
attributable to the proposed rules is 275 hours. For proxy statements,
consistent with our customary assumptions, we estimate that 75% of the
burden of preparation is carried by the company internally and that 25%
of the burden is carried by outside professionals retained by the
company to review corporate disclosure at an average cost of $400 per
hour.\22\ The portion of the burden carried by outside professionals is
reflected as a cost, while the portion of the burden carried by the
company internally is reflected in hours. Based on the foregoing, we
calculated the additional annual compliance burdens resulting from the
proposed amendments at 206.5 hours (this is 75% of the total 275 hours
in increased burden carried by the company internally) and $27,500
(this is 25% of the total increased hourly burden carried by outside
professionals and reflected as a cost). The current total annual burden
hours and cost of Schedule 14A approved by the OMB is 555,683 hours and
$63,709,987. Giving effect to the incremental increases in burden hours
and costs as a result of the proposed amendments, the total annual
burden hours and cost of Schedule 14A would be 555,889.5 hours and
$63,737,487.
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\21\ Our staff made this estimate from publicly-available
information about TARP recipients. The estimate is based on the
number of TARP recipients that are subject to our proxy rules and
that have not repaid their TARP obligations.
\22\ We estimate an hourly cost of $400 per hour for the service
of outside professionals based on our consultations with several
registrants and law firms and other persons who regularly assist
registrants in preparing and filing proxy statements and related
disclosures with the Commission.
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C. Request for Comment

Pursuant to 44 U.S.C. 3506(c)(2)(B), we request comment in order
to:
Evaluate whether the proposed collections of information
are necessary for the proper performance of the functions of the
Commission, including whether the information will have practical
utility;
Evaluate the accuracy of our estimate of the burden of the
proposed collections of information;
Determine whether there are ways to enhance the quality,
utility, and clarity of the information to be collected;
Evaluate whether there are ways to minimize the burden of
the collections

[[Page 32477]]

of information on those who respond, including through the use of
automated collection techniques or other forms of information
technology; and
Evaluate whether the proposed amendments will have any
effects on any other collections of information not previously
identified in this section.
Any member of the public may direct to us any comments concerning
the accuracy of these burden estimates and any suggestions for reducing
the burdens. Persons who desire to submit comments on the collection of
information requirements should direct their comments to the OMB,
Attention: Desk Officer for the Securities and Exchange Commission,
Office of Information and Regulatory Affairs, Washington, DC 20503, and
send a copy of the comments to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission, 100 F Street, NE., Washington, DC
20549-1090, with reference to File No. S7-12-09. Requests for materials
submitted to the OMB by us with regard to these collections of
information should be in writing, refer to File No. S7-12-09 and be
submitted to the Securities and Exchange Commission, Office of Investor
Education and Advocacy, 100 F Street, NE., Washington, DC 20549-0213.
Because OMB is required to make a decision concerning the collections
of information between 30 and 60 days after publication, your comments
are best assured of having their full effect if OMB receives them
within 30 days of publication.

IV. Cost-Benefit Analysis

We are sensitive to the costs and benefits of the proposed
amendments. In this section, we examine the benefits and costs of our
proposed amendments. We request that commenters provide views and
supporting information as to the benefits and costs associated with the
proposals. We seek estimates of these costs and benefits, as well as
any costs and benefits not already identified.\23\
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\23\ The cost-benefit analysis in this section addresses the
costs and benefits of the proposed amendments. The analysis does
not, however, address the costs and benefits of the requirement in
Section 111(e)(1) of the EESA that TARP recipients conduct a
separate shareholder vote on executive compensation. While the
proposed amendments set forth the manner in which registrants that
are TARP recipients would implement this requirement when complying
with the federal proxy rules, such registrants are already subject
to the provisions of Section 111(e)(1) of the EESA and thus we are
only addressing the incremental costs and benefits of the proposed
amendments.
---------------------------------------------------------------------------

A. Benefits

We are proposing amendments to the federal proxy rules to help
implement the requirement in Section 111(e)(1) of the EESA that TARP
recipients provide a separate shareholder vote to approve the
compensation of executives. Under the proposed amendments, this
separate shareholder vote would be required when registrants that are
TARP recipients solicit proxies during the period in which any
obligation arising from financial assistance provided under the TARP
remains outstanding, and the solicitation relates to an annual meeting
(or a special meeting in lieu of an annual meeting) for which proxies
will be solicited for the election of directors. Companies required to
provide such a separate shareholder vote would also be required to
disclose in their proxy statements the EESA requirement to provide such
a vote, and to briefly explain the general effect of the vote.
We believe the proposed amendments will benefit registrants that
are TARP recipients by clarifying how they must comply with the
requirements of Section 111(e)(1) of the EESA in the context of the
federal proxy rules. The proposed amendments eliminate uncertainty that
may exist among TARP recipients and other market participants regarding
what is necessary under the Commission's proxy rules when conducting a
shareholder vote required under Section 111(e) of the EESA. In addition
to these benefits, we believe the proposed amendments allow TARP
recipients adequate flexibility under the proxy rules to comply with
the requirements of the EESA. By providing clarity while maintaining
adequate flexibility, we believe the proposed amendments could reduce
the amount of management time and legal expenses necessary to ensure
that registrants that are TARP recipients comply with their obligations
under both the EESA and the federal proxy rules. This would benefit
TARP recipients and their shareholders.
We believe the proposed amendments will benefit investors by
resulting in clear disclosure about the requirements of Section
111(e)(1) of the EESA as applied to Exchange Act registrants. When a
separate shareholder vote on the compensation of executives is required
by the EESA, proposed Rule 14a-20 would specify and clarify that
requirement in the context of the federal proxy rules. By doing so, we
believe Rule 14a-20 would promote better compliance with the
requirements of Section 111(e)(1) of the EESA when registrants that are
TARP recipients conduct solicitations subject to our proxy rules. The
proposed amendments to Schedule 14A would require disclosure about the
EESA requirement to provide a separate shareholder vote and the general
effects of such a vote. Together, the proposed amendments are intended
to provide useful, comparable and consistent information to assist an
informed voting decision when registrants that are TARP recipients
present to investors the advisory vote on executive compensation
required pursuant to Section 111(e)(1) of the EESA. The specification
and clarification of the requirement in our proposed rule would also
help provide certainty about the nature of the TARP recipient's
responsibility to hold the advisory vote, making it easier for
companies to comply.

B. Costs

We believe the proposed amendments would not add any significant
costs to those already created by the requirements of Section 111(e)(1)
of the EESA and our proxy rules. The proposed amendments are intended
to help implement the existing substantive EESA requirement in the
context of the federal proxy rules. While our proposed amendments to
Schedule 14A would require certain disclosures not explicitly required
by EESA, we believe any incremental costs imposed by our proposed
amendments would be minimal. For purposes of the PRA, we estimate the
total annual incremental cost of the amendments to be 275 hours. We
request comment on the amount of any additional costs issuers may incur
as a result of the proposed amendments.

V. Small Business Regulatory Enforcement Fairness Act

For purposes of the Small Business Regulatory Enforcement Fairness
Act of 1996, or ``SBREFA,'' \24\ we solicit data to determine whether
the proposals constitute a ``major'' rule. Under SBREFA, a rule is
considered ``major'' where, if adopted, it results or is likely to
result in:
---------------------------------------------------------------------------

\24\ 5 U.S.C. 603.
---------------------------------------------------------------------------

An annual effect on the economy of $100 million or more
(either in the form of an increase or a decrease);
A major increase in costs or prices for consumers or
individual industries; or
Significant adverse effects on competition, investment or
innovation.
We request comment on the potential impact of the proposed
amendments on the U.S. economy on an annual basis, any potential
increase in costs or prices for consumers or individual industries, and
any potential effect on competition, investment or innovation.
Commenters are requested to provide empirical data

[[Page 32478]]

and other factual support for their views if possible.

VI. Consideration of Impact on the Economy, Burden on Competition and
Promotion of Efficiency, Competition and Capital Formation

Section 23(a)(2) of the Exchange Act \25\ also requires us, when
adopting rules under the Exchange Act, to consider the impact that any
new rule would have on competition. Section 23(a)(2) prohibits us from
adopting any rule that would impose a burden on competition not
necessary or appropriate in furtherance of the purposes of the Exchange
Act. In addition, Section 3(f) \26\ of the Exchange Act requires us,
when engaging in rulemaking where we are required to consider or
determine whether an action is necessary or appropriate in the public
interest, to also consider whether the action will promote efficiency,
competition, and capital formation.
---------------------------------------------------------------------------

\25\ 15 U.S.C. 78w(a).
\26\ 15 U.S.C. 78c(f).
---------------------------------------------------------------------------

We believe the proposed amendments would benefit registrants that
are TARP recipients and their shareholders by providing certainty
regarding how registrants that are TARP recipients must comply with the
EESA requirement to hold an advisory vote on executive compensation in
the context of the federal proxy rules, while maintaining adequate
flexibility to comply with this requirement. The certainty should
promote efficiency. The proposed amendments also would help ensure that
shareholders receive disclosure regarding the required vote and the
nature of a registrant's responsibilities to hold the vote under the
EESA. As discussed in greater detail above, we believe these benefits
would be achieved without imposing any significant additional burdens
on registrants that are TARP recipients. We do not anticipate any
effect on competition or capital formation. We do believe the rules
will make compliance with EESA more efficient.
We request comment on whether the proposed amendments, if adopted,
would impose a burden on competition. We also request comment on
whether the proposed amendments, if adopted, would promote efficiency,
competition, and capital formation. Commenters are requested to provide
empirical data and other factual support for their view to the extent
possible.

VII. Regulatory Flexibility Act Certification

The Commission hereby certifies pursuant to 5 U.S.C. 605(b), that
the amendments contained in this release, if adopted, would not have a
significant economic impact on a substantial number of small entities.
Rule 0-10 under the Exchange Act defines small entities for these
purposes as those with total assets of $5 million or less on the last
day of their most recent fiscal year.\27\ The proposed amendments would
only impact TARP recipients with a class of securities registered
pursuant to Section 12 of the Exchange Act and thus subject to the
federal proxy rules.\28\ We believe no TARP recipients that are
required to comply with our proxy rules are small entities. In
addition, if any small entities become subject to our proposed
amendments, we do not believe the proposed amendments would have a
significant economic impact on them. Any small entity subject to our
proposed amendments would already be subject to the requirements of
Section 111(e)(1) of the EESA. Further, we do not believe the EESA
requires ``smaller reporting companies'' to provide a compensation
discussion and analysis. As discussed in greater detail above, we do
not believe our proposed rules impose a significant additional cost.
For these reasons, the proposed amendments should not have a
significant economic impact on a substantial number of small entities.
---------------------------------------------------------------------------

\27\ 17 CFR 240.0-10.
\28\ See 17 CFR 240.14a-2.
---------------------------------------------------------------------------

We solicit written comments regarding this certification. We
request that commenters describe the nature of any impact on small
entities and provide empirical data to support the extent of the
impact.

VIII. Statutory Authority and Text of the Proposed Amendments

The amendments described in this release are being proposed under
the authority set forth in Section 111(e) of the Emergency Economic
Stabilization Act of 2008 (12 U.S.C. 5221(e)) and Sections 14(a) and
23(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78n(a) and
78w(a)).

List of Subjects in 17 CFR Part 240

Reporting and recordkeeping requirements, Securities.

Text of the Proposed Amendments

For the reasons set out in the preamble, the Commission proposes to
amend title 17, chapter II, of the Code of Federal Regulations as
follows:

PART 240--GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF
1934

1. The general authority citation for Part 240 is revised to read
as follows:

Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3,
77eee, 77ggg, 77nnn, 77sss, 77ttt, 78c, 78d, 78e, 78f, 78g, 78i,
78j, 78j-1, 78k, 78k-1, 78l, 78m, 78n, 78o, 78p, 78q, 78s, 78u-5,
78w, 78x, 78ll, 78mm, 80a-20, 80a-23, 80a-29, 80a-37, 80b-3, 80b-4,
80b-11, and 7201 et seq., 18 U.S.C. 1350, and 12 U.S.C. 5221(e)(3),
unless otherwise noted.
* * * * *
2. Add Sec. 240.14a-20 to read as follows:

Sec. 240.14a-20 Shareholder Approval of Executive Compensation of
TARP Recipients.

If a solicitation is made by a registrant that is a TARP recipient,
as defined in section 111(a)(3) of the Emergency Economic Stabilization
Act of 2008 (12 U.S.C. 5221(a)(3)), during the period in which any
obligation arising from financial assistance provided under the TARP,
as defined in section 3(8) of the Emergency Economic Stabilization Act
of 2008 (12 U.S.C. 5202(8)), remains outstanding and the solicitation
relates to an annual (or special meeting in lieu of the annual) meeting
of security holders for which proxies will be solicited for the
election of directors, as required pursuant to section 111(e)(1) of the
Emergency Economic Stabilization Act of 2008 (12 U.S.C. 5221(e)(1)),
the registrant shall provide a separate shareholder vote to approve the
compensation of executives, as disclosed pursuant to Item 402 of
Regulation S-K (Sec. 229.402 of this chapter), including the
compensation discussion and analysis, the compensation tables, and any
related material.

Note to Sec. 240.14a-20: TARP recipients that are smaller
reporting companies entitled to provide scaled disclosure pursuant
to Item 402(l) of Regulation S-K are not required to include a
compensation discussion and analysis in their proxy statements in
order to comply with this section. In the case of these smaller
reporting companies, the required vote must be to approve the
compensation of executives as disclosed pursuant to Item 402(m)
through (r) of Regulation S-K.

3. Amend Sec. 240.14a-101 by adding a sentence at the end of Item
20 to read as follows:

Sec. 240.14a-101 Schedule 14A. Information required in Proxy
Statement.

Schedule 14A Information
* * * * *
Item 20. Other proposed action. * * * Registrants required to
provide a

[[Page 32479]]

separate shareholder vote pursuant to section 111(e)(1) of the
Emergency Economic Stabilization Act of 2008 (12 U.S.C. 5221(e)(1)) and
Sec. 240.14a-20 shall disclose that they are providing such a vote as
required pursuant to the Emergency Economic Stabilization Act of 2008,
and briefly explain the general effect of the vote.
* * * * *

July 1, 2009.

By the Commission.
Elizabeth M. Murphy,
Secretary.
[FR Doc. E9-16037 Filed 7-7-09; 8:45 am]
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