Standards of Conduct and Referral of Known or Suspected Criminal Violations; Disclosure to Shareholders; and Disclosure to Investors in System-Wide and Consolidated Bank Debt Obligations of the Farm Credit System; Compensation, Retirement Programs, and Related Benefits, 70619-70623 [2010-29025]
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Federal Register / Vol. 75, No. 222 / Thursday, November 18, 2010 / Proposed Rules
later than early January 2011. In order
to allow the public sufficient time to
review and comment on the proposed
rule with the benefit of review of the
draft implementation guidance, the NRC
has decided to extend the comment
period until February 15, 2011.
Dated at Rockville, Maryland, this 10th day
of November 2010.
For the Nuclear Regulatory Commission.
Annette Vietti-Cook,
Secretary of the Commission.
[FR Doc. 2010–29108 Filed 11–17–10; 8:45 am]
BILLING CODE 7590–01–P
FARM CREDIT ADMINISTRATION
12 CFR Parts 612, 620, and 630
RIN 3052–AC41
Standards of Conduct and Referral of
Known or Suspected Criminal
Violations; Disclosure to
Shareholders; and Disclosure to
Investors in System-Wide and
Consolidated Bank Debt Obligations of
the Farm Credit System;
Compensation, Retirement Programs,
and Related Benefits
Farm Credit Administration.
Advance notice of proposed
rulemaking (ANPRM).
AGENCY:
ACTION:
The Farm Credit
Administration (FCA, we, or our) is
requesting comments on ways to clarify
or otherwise enhance our regulations
related to Farm Credit System (System)
institutions’ disclosures to shareholders
and investors on compensation,
retirement programs and related benefits
for senior officers, highly compensated
individuals, and certain individual
employees or other groups of
employees. We are also seeking
comments on whether we should issue
new regulations in related areas. In
keeping with today’s financial and
economic environment, we believe it
prudent and timely to undertake a
review of our regulatory guidance on the
identified areas. We intend to consider
the information and suggestions we
receive in response to this ANPRM
when developing a rulemaking on
compensation disclosures and related
areas.
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SUMMARY:
You may send comments on or
before March 18, 2011.
ADDRESSES: We offer a variety of
methods for you to submit your
comments. For accuracy and efficiency
reasons, commenters are encouraged to
submit comments by e-mail or through
the FCA’s Web site. As facsimiles (fax)
DATES:
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are difficult for us to process and
achieve compliance with section 508 of
the Rehabilitation Act, we are no longer
accepting comments submitted by fax.
Regardless of the method you use,
please do not submit your comments
multiple times via different methods.
You may submit comments by any of
the following methods:
• E-mail: Send us an e-mail at regcomm@fca.gov.
• FCA Web site: https://www.fca.gov.
Select ‘‘Public Commenters,’’ then
‘‘Public Comments,’’ and follow the
directions for ‘‘Submitting a Comment.’’
• Federal eRulemaking Portal: https://
www.regulations.gov. Follow the
instructions for submitting comments.
• Mail: Gary K. Van Meter, Deputy
Director, Office of Regulatory Policy,
Farm Credit Administration, 1501 Farm
Credit Drive, McLean, VA 22102–5090.
You may review copies of all comments
we receive at our office in McLean,
Virginia or on our Web site at https://
www.fca.gov. Once you are in the Web
site, select ‘‘Public Commenters,’’ then
‘‘Public Comments,’’ and follow the
directions for ‘‘Reading Submitted
Public Comments.’’ We will show your
comments as submitted, including any
supporting data provided, but for
technical reasons we may omit items
such as logos and special characters.
Identifying information that you
provide, such as phone numbers and
addresses, will be publicly available.
However, we will attempt to remove email addresses to help reduce Internet
spam.
FOR FURTHER INFORMATION CONTACT:
Deborah A. Wilson, Senior
Accountant, Office of Regulatory Policy,
Farm Credit Administration, McLean,
VA 22102–5090, (703) 883–4414, TTY
(703) 883–4434, or
Laura McFarland, Senior Counsel,
Office of General Counsel, Farm Credit
Administration, McLean, VA 22102–
5090, (703) 883–4020, TTY (703) 883–
4020.
SUPPLEMENTARY INFORMATION:
I. Objective
The objective of this ANPRM is to
gather information for the development
of a rulemaking that could result in:
• Enhancing the transparency and
consistency of disclosures related to
System institution compensation
policies and practices 1 for senior
officers,2 highly compensated
1 12
CFR 620.5(i).
references to senior officer(s) in this ANPRM
refer to a senior officer as defined in 12 CFR
619.9310.
2 All
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individuals,3 and/or certain other
groups of employees whose activities,
either individually or in the aggregate,
are reasonably likely to materially
impact an institution’s financial
performance and risk profile;
• Clarifying and enhancing the
authorities and responsibilities of
System institution compensation
committees 4 in furtherance of their
oversight activities;
• Increasing user-control in System
institutions’ compensation policies and
practices by providing for a non-binding
shareholder vote on senior officer
compensation;
• Requiring timely notice to
interested parties of significant events,
facts or circumstances occurring at a
System institution between required
reporting periods;
• Addressing the appropriateness of,
and enhancing the disclosure of, certain
payments to System institution
directors; and
• Providing audit committees greater
authority to access external resources
when needed.
II. Background
The Farm Credit Act of 1971, as
amended (Act),5 authorizes the FCA to
issue regulations implementing the
provisions of the Act, including those
provisions that address System
institution disclosures to shareholders
and investors. Our regulations are
intended to ensure the safe and sound
operations of System institutions and
govern the disclosure of financial
information to shareholders of, and
investors in, the Farm Credit System.6
Congress explained in section 514 of the
Farm Credit Banks and Associations
Safety and Soundness Act of 1992 (1992
Act) 7 that disclosure of financial
information and the reporting of
potential conflicts of interest by
institution directors, officers, and
employees help ensure the financial
viability of the System. In the 1992 Act,
Congress required that we review our
regulations to ensure that System
institutions provide adequate
disclosures to shareholders and other
interested parties. We completed this
initial review in 1993 making
appropriate amendments to our
3 All references to highly compensated
individuals in this ANPRM refer to those officers
described in 12 CFR 620.5(i)(2)(i)(B).
4 All references to compensation committees in
this ANPRM refer to compensation committees as
set forth in 12 CFR 620.31 and 12 CFR 630.6(b).
5 Public Law 92–181, 85 Stat. 583, 12 U.S.C. 2001
et seq.
6 Section 5.17(a)(8), (9) and (10) of the Act. 12
U.S.C. 2252(a)(8)(9) and (10).
7 Public Law 102–552, 106 Stat. 4131.
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‘‘Standards of Conduct’’ regulations (59
FR 24889, May 13, 1994), our
‘‘Disclosure to Shareholders’’ regulations
(59 FR 37406, July 22, 1994), and our
‘‘Disclosure to Investors in System-wide
and Consolidated Bank Debt Obligations
of the Farm Credit System’’ regulations
(59 FR 46742, September 12, 1994). We
continue to periodically review and
update our disclosure regulations to
ensure they are appropriate for current
business practices, that they ensure
System institutions provide their
shareholders with information to assist
them in making informed decisions
regarding the operations of the
institutions, and that the disclosures
provide investors with information
necessary to assist them in making
investment decisions.
In keeping with today’s economic and
business environments and in
accordance with the findings of
Congress under the 1992 Act, we believe
it is prudent and timely to undertake a
review of our regulatory guidance
related to senior officer compensation.
The recent turmoil within the financial
industry and the ensuing decline in the
economy highlight the need to ensure
that shareholders and investors are
informed of compensation policies and
practices. Shareholders and investors
need information that allows them to
assess which policies and practices
encourage excessive risk-taking at the
expense of the institution’s safety and
soundness. With appropriate
information, shareholders and investors
can evaluate whether the institution’s
compensation policies and practices
create an environment in which
employees take imprudent risks in order
to maximize their expected income at
the expense of the institution’s earnings
performance and shareholder return.
Similar efforts are in process at other
regulatory agencies. For example, the
Securities and Exchange Commission
(SEC) recently revised its regulations to
require that issuers disclose their
compensation policies and practices as
they relate to the company’s risk
management.8 Likewise, the Board of
Governors of the Federal Reserve
System (FRB) has undertaken two
supervisory initiatives involving a
review of incentive compensation
practices at certain banking
organizations. The FRB has issued
supervisory guidance designed to
ensure that incentive compensation
policies at banking organizations
supervised by the FRB do not encourage
imprudent risk-taking and are consistent
with the safety and soundness of the
8 See SEC Release No. 33–9089, ‘‘Proxy Disclosure
and Enhancements,’’ issued February 28, 2010.
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organization.9 Also, the recently enacted
Dodd-Frank Wall Street Reform and
Consumer Protection Act (Wall Street
Reform Act) 10 includes amendments to
the Securities Exchange Act of 1934
requiring, among other things, a
separate resolution subject to a nonbinding shareholder vote on the
compensation of executive officers of a
SEC issuer.11 In addition, under the
Wall Street Reform Act, each SEC issuer
is required to disclose information that
shows the relationship between
executive compensation actually paid
and the financial performance of the
reporting entity.12
Active, effective oversight of senior
officer compensation policies and
practices will help align those policies
and practices with safe and sound
operations. Providing transparent,
timely and accurate disclosures of
senior officer compensation policies and
practices will help ensure an institution
adequately fulfills its obligation to its
shareholders and investors.
III. Areas of Consideration
We are reviewing our regulations in
order to identify where our disclosure
regulations might be amended to
enhance the transparency of an
institution’s compensation policies and
practices and if those practices affect the
safety, soundness and financial
performance of the institution. Also, we
are reviewing our regulations to
determine if they should be amended to
facilitate qualified, objective and active
compensation committees that are
tasked to oversee an institution’s
compensation programs. We are
interested in public response to the
questions contained in this ANPRM,
including ways in which our regulations
might further enhance disclosures of
senior officer compensation policies and
practices. We are also interested in the
ways in which an institution’s
compensation committee might further
engage in active and effective oversight
of those policies and practices.
A. Enhanced Disclosures of Senior
Officer Compensation
Our existing disclosure regulations at
§§ 620.5(i) and 630.20(i) require that
certain disclosures of compensation
9 Board of Governors of the Federal Reserve
System, Docket No. OP–1374, ‘‘Guidance on Sound
Incentive Compensation Policies,’’ June 21, 2010.
10 Public Law 111–203, 124 Stat. 1376.
11 See section 951 of Subtitle E of Title IX,
‘‘Investor Protections and Improvements to the
Regulation of Securities,’’ of the Wall Street Reform
Act.
12 See section 953 of Subtitle E of Title IX,
‘‘Investor Protections and Improvements to the
Regulation of Securities,’’ of the Wall Street Reform
Act.
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paid to, or earned by, senior officers and
other highly compensated employees
(hereinafter collectively referred to as
‘‘senior officers’’) be included in an
institution’s annual report to
shareholders (or an association’s annual
meeting information statement). Our
regulations also require disclosure of
certain benefits paid to senior officers
pursuant to a plan or arrangement in
connection with resignation, retirement,
or termination. However, depending on
when an officer retires (or otherwise
terminates employment with the
institution), the payment may not be
disclosed or it may not be disclosed in
a timely manner due to the timing of the
actual payment to the officer. As a
result, shareholders and investors may
not have all the information they need
to make informed decisions on an
institution’s compensation policies and
practices for senior officers.
We are considering whether current
required disclosures should be changed
to include quantitative and qualitative
information on the obligations that have
accrued to an institution from senior
officers’ supplemental retirement and
deferred compensation plans. Also, we
want to identify how the disclosures
could provide greater clarity to the
variable components of senior officers’
compensation packages. We believe
disclosures should provide information
that assists shareholders and investors
in understanding the impact of
compensation programs on an
institution’s operations. Shareholders
and investors require sufficient
information to assess whether senior
officers’ compensation is appropriate in
view of the institution’s financial
condition, risk profile, and business
activities. This information enables
shareholders to understand how an
institution’s board or compensation
committee exercises its oversight
responsibilities of ensuring a
comprehensive and balanced
compensation program that holds
management accountable for an
institution’s financial performance.
Questions (1) through (8) of Section
IV of this ANPRM address this topic.
B. Compensation Committees
Our existing rules at §§ 620.31 and
630.6(b) require that System institutions
have compensation committees and that
these committees be responsible for
reviewing the compensation policies
and plans for senior officers and
employees, as well as approving the
overall compensation program for senior
officers. Compensation committee
oversight is critical in ensuring
compensation policies and practices do
not jeopardize an institution’s safety
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and soundness. In FCA bookletter,
‘‘Compensation Committees’’ (BL–060),
dated July 9, 2009, we issued guidance
on how compensation committees could
fulfill these duties. We are considering
incorporating this guidance into our
existing rules. We are also considering
additional ways to enhance the
authorities and responsibilities of
System institution compensation
committees to continue to achieve
active and effective oversight of senior
officers’ compensation policies and
practices. For example, in order for
compensation committees to effectively
fulfill their role, they must be
specifically tasked with ensuring that
compensation policies and practices do
not jeopardize the safety and soundness
of the institution. We are considering
ways to re-emphasize that oversight
responsibility. Understanding the
financial commitment and total cost to
the institution of the compensation
programs and verifying that the
institution is providing accurate and
transparent disclosures on
compensation are appropriate tasks for
a compensation committee.
We are aware that some System
institutions engage compensation
consultants to make recommendations
on compensation programs, plans,
policies and practices. Compensation
consultants can provide significant
expertise to the board or compensation
committee on compensation matters.
These same consultants may also
provide additional services, such as
administration of compensation and
benefit programs or actuarial services,
on behalf of an institution’s
management. The degree of reliance
placed on the consultant’s expertise by
the compensation committee may be a
function of the consultant’s
independence from management
influence. Therefore, we are considering
requiring disclosure of the additional
services provided to management by the
consultant and requiring that the related
fees paid to the consultant be disclosed.
We are also considering if the
significance of these additional services
should impact whether they are
included in the compensation
disclosures.
Questions (9) through (13) of Section
IV of this ANPRM address this topic.
C. Shareholder Approval of Senior
Officers’ Compensation
Recent initiatives, such as the Wall
Street Reform Act, require entities that
are SEC issuers to include a separate
resolution in their proxy solicitations
subject to shareholder vote on the
compensation of the entities’ executives.
We are considering whether the FCA
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should issue regulations requiring a
separate, non-binding, advisory
shareholder vote on senior officer
compensation and, if so, what those
regulations should require. By providing
for a non-binding advisory vote,
shareholders would have a process
through which they could express their
approval or disapproval of an
institution’s compensation policies and
practices. Board oversight and
governance of compensation policies
and practices may be more effective and
enhanced if the board is explicitly
informed of shareholder approval or
disapproval. A non-binding, advisory
shareholder vote would not bind the
board of directors or compensation
committee to any particular course of
action and would not overrule any
board or committee decisions related to
senior officers’ compensation.
Submitting senior officer
compensation to a non-binding,
advisory shareholder vote may be a
practice that is appropriate for
institutions that are cooperatively
structured. One of the core cooperative
principles is that those who use the
cooperative should also control it.
Submitting senior officer compensation
to an advisory vote by System
institution shareholders may promote
member participation in their
institution.
Question (14) of Section IV of this
ANPRM addresses this topic.
D. Notice of Significant or Material
Events
The FCA promotes sound governance
practices. In doing so, we believe
interested parties deserve timely notice
and disclosure of any event, fact or
circumstance that boards and
management consider material or
significant to the operations or financial
condition of their institution. The SEC
requires its registrants to file, in a timely
manner, a current report to announce
major events that occur between
reporting periods (i.e., the Form 8–K,
Current Report). We are considering
requiring System institutions to provide
similar current reporting on intervening
events that occur between annual and
quarterly reporting periods. The
intervening events we are considering
include enforcement actions taken by or
supervisory agreements with the FCA,
departure of an institution’s director or
an officer, results of matters an
institution may submit to a vote by its
shareholders, and other similar events.
Question (15) of Section IV of this
ANPRM addresses this topic.
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70621
E. Remuneration to Boards of Directors
in Connection With Conclusion of
Services
Section 612.2130(b) of our regulations
defines a conflict of interest, or the
appearance thereof. The rule states that
a conflict exists, or may appear to exist,
when a person has a financial interest
in a transaction, relationship or activity
that actually affects, or has the
appearance of affecting, the person’s
ability to perform official duties and
responsibilities in a totally impartial
manner and in the best interest of the
institution. Payments to a director in
connection with a restructuring or
downsizing of the board or as a result
of a merger, consolidation or other form
of institutional reorganization may
result in a board member having, or
appearing to have, a conflict of interest
or lack of total independence related to
the transaction or board action.
Shareholders and boards have approved
such payments for economic reasons or
when they wanted to recognize the
contributions of directors stepping
down from the board. We are
considering regulating payments to
directors under certain circumstances
and also considering how or if these
payments should be disclosed.
Question (16) of Section IV of this
ANPRM addresses this issue.
F. Audit Committees
Sections 620.30(c) and 630.6(a)(3) of
the FCA’s regulations require a twothirds majority vote of the full board of
directors of a bank, an association or the
Federal Farm Credit Banks Funding
Corporation (Funding Corporation) to
deny its respective audit committee’s
request for resources. We are
considering whether we should remove
the ability of the full board to deny a
request from its audit committee for
external resources.13 We are considering
this matter based on a May 7, 2010,
request from the Funding Corporation
submitted on behalf of the System Audit
Committee (SAC), asking us to amend
§ 630.6(a)(3) of our regulations to
remove the authority of the board of
directors of the Funding Corporation to
deny the SAC certain resources.
Question (17) of Section IV of this
ANPRM addresses this request.
IV. Request for Comments
We request and encourage any
interested person(s) to submit comments
on the following questions and ask that
you support your comments with
relevant data or examples. We remind
13 External resources may include, but not be
limited to, outside advisors, consultants, or legal
counsel.
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commenters that comments, and data
submitted in support of a comment, are
available to the public through our
rulemaking files.
(1) Should FCA enhance senior officer
compensation disclosure requirements
to improve transparency and current
practices? Specifically, should the FCA
consider enhancing disclosures on:
(a) The significant terms of senior
officers’ employment arrangements,
whether or not dollar amounts are paid
or earned during the reporting year,
including components related to
deferred compensation plans,
supplemental retirement plans,
performance agreements, and incentive
or bonus compensation based on
financial information; and
(b) The position titles of officers
included in the aggregated group’s
compensation reported under existing
§ 620.5(i)(2)(i)(B) of our regulations?
(2) Should the FCA remove from
§ 620.5(i)(2) the option that allows
associations to disclose senior officer
compensation information in annual
meeting information statements instead
of disclosing it in annual reports?
(3) What additional disclosures
(qualitative and quantitative) are needed
to ensure that all compensation,
including deferred compensation and
supplemental retirement benefits, are
fully disclosed in a timely manner and
that an institution’s total compensation
policies, practices, and obligations for
senior officers are effectively
communicated in a transparent and
timely manner?
(4) Should FCA require the disclosure
of compensation policies and practices
related to the activities of certain
employees, other than senior officers,
which, either individually or in the
aggregate, may expose the institution to
a material amount of adverse risk? If so,
what disclosures are needed to ensure
the compensation programs, practices,
and incentives for such employees are
adequately disclosed so that
shareholders and investors are informed
of the potential risk areas?
(5) To enhance transparency and a
comprehensive understanding of the
link between risk, return, and
compensation incentives, should a
discussion of an institution’s overall
risk and reward structure for senior
officer compensation and benefit
policies and practices be a required
disclosure and, if so, what level of
disclosure or qualitative information
should be required?
(6) To ensure that all sources of
compensation are disclosed, should
institutions be required to disclose
estimated payments to be made in the
future to each senior officer in
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connection with deferred compensation
arrangements, performance or incentive
awards, and/or supplementary
retirement benefits? If so, how should
the disclosures be presented and for
what periods? What other sources of
senior officer compensation should be
captured in current financial disclosures
to shareholders?
(7) To ensure that shareholders and
investors have an appropriate
understanding of the assumptions used
by the institution to determine
estimated future payments for
compensation or benefits, if disclosed,
should the assumptions used to
determine the future payments also be
disclosed? If so, should the disclosure
include why the assumptions used to
determine the estimated payments are
different from those used to determine
the present value of dollar amounts
disclosed in the Summary
Compensation Table?
(8) Should institutions be required to
disclose:
(a) The dollar amount of any tax
reimbursements (such as Internal
Revenue Code Section 280G tax grossups) provided by the institution to a
senior officer;
(b) The business reason(s) for any
material or significant change or
adjustment to compensation or benefit
programs from prior periods that
increase or decrease salaries or
compensation programs (individually or
in the aggregate);
(c) Quantitative and qualitative
benchmarks used to determine senior
officer compensation and performance
and incentive bonuses, if and why
benchmarks used in the current
reporting period were different from
those used in prior periods, the business
reason(s) for changing the benchmarks
used, whether the individual officer was
successful in attaining the requirements
of the benchmark used, and if and how
each benchmark relates to the financial
performance of the institution;
(d) Significant events, trends or other
information necessary to understand the
institution’s senior officer compensation
policies and practices; and
(e) The vesting periods for long-term
incentive and/or performance
compensation or retirement benefits?
(9) To support the compensation
committee’s review and accountability
processes, should compensation
committees be required to certify
compensation disclosures? If so, should
the certification include a statement to
the effect that:
(a) The compensation disclosures are
true, accurate, and complete, and that
the disclosures are in compliance with
all applicable regulatory requirements;
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(b) Comparable compensation
practices used by the institution to
develop its compensation policies
support the valuation of senior officer
compensation; and
(c) The institution’s compensation
policies and practices are consistent
with the adverse risk-bearing capacity of
the institution (as determined by the
institution’s board) and do not pose a
threat to the safety and soundness of the
institution?
(10) If compensation committees are
required to certify compensation
disclosures, what other areas should be
addressed in the certification and what
related statements should the committee
certify?
(11) Would it strengthen the operation
and independence of the compensation
committee if the FCA required that at
least one of the compensation
committee members be an outside
director (independent of any affiliation
with the institution other than serving
as a director)? What would be the
benefits and/or concerns with such a
requirement?
(12) If a System institution
compensation committee uses the
services of a compensation consultant,
would the disclosure of that information
be meaningful to shareholders and
investors? What types of disclosures
should be provided?
(13) If institution management
engages the services of a compensation
consultant that is also used by the
compensation committee, or vice versa,
should that fact be disclosed? If so,
should the disclosure include a
description of the additional services
provided by the consultant for
management that:
(a) Benefits the institution as a whole,
and
(b) Are provided solely for
management’s benefit? Should the
consultant’s fees for the additional
services be disclosed if those fees are in
excess of de minimis amounts?
(14) To enhance transparency and
shareholder understanding of
compensation programs and practices,
should FCA’s regulations provide for a
separate, non-binding advisory vote by
System institution voting shareholders
on senior officer compensation? If so:
(a) When and how should the vote
occur;
(b) Within what timeframe should the
results of the vote be reported to
shareholders;
(c) Should certain System institutions
be exempt from the voting requirement
and, if so, what criteria should be used
to exempt those institutions; and
(d) If a vote is required, should
institutions be required to identify
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senior officer compensation amounts on
an individual basis to facilitate the
vote? 14
(15) Should System institutions be
required to issue current reports on
events, facts, or circumstances that
management considers material or
significant to the operations or financial
condition of a System institution,
similar to the notice on changes in
capital levels described in § 620.15? 15 If
so, what form should the report take,
what types of events should be reported,
and what timeframe would be
appropriate for its issuance?
(16) To ensure that certain payments
to institution directors do not create the
potential for a conflict of interest, or
appearance thereof, should payments
made to System institution directors in
connection with a restructuring or
downsizing of the board, or as a result
of a merger, consolidation or other form
of institutional reorganization be
allowed or disallowed?
(a) Under what circumstances would
such payments constitute a conflict of
interest or an appearance thereof?
(b) If allowed, how and when should
such payments be disclosed?
(17) Should FCA remove from
§§ 620.30(c) and 630.6(a)(3) the ability
of a board of directors to deny a request
for resources from its audit committee?
Dated: November 12, 2010.
Mary Alice Donner,
Acting Secretary, Farm Credit Administration
Board.
[FR Doc. 2010–29025 Filed 11–17–10; 8:45 am]
BILLING CODE 6705–01–P
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR Part 39
[Docket No. FAA–2010–1152; Directorate
Identifier 2009–CE–026–AD]
RIN 2120–AA64
Airworthiness Directives; DORNIER
LUFTFAHRT GmbH Models Dornier
228–100, Dornier 228–101, Dornier
228–200, Dornier 228–201, Dornier
228–202, and Dornier 228–212
Airplanes
Federal Aviation
Administration (FAA), Department of
Transportation (DOT).
jlentini on DSKJ8SOYB1PROD with PROPOSALS
AGENCY:
14 12 CFR 620.5(i)(2)(i)(B) allows aggregated
disclosure in the annual report of compensation
paid to senior officers.
15 12 CFR 620.15 provides for the notice to the
FCA and shareholders by System banks and
associations when an institution is not in
compliance with the minimum permanent capital
standards required by the FCA.
VerDate Mar<15>2010
16:18 Nov 17, 2010
Jkt 223001
Notice of proposed rulemaking
(NPRM).
ACTION:
We propose to adopt a new
airworthiness directive (AD) for the
products listed above that would
supersede an existing AD. This
proposed AD results from mandatory
continuing airworthiness information
(MCAI) originated by an aviation
authority of another country to identify
and correct an unsafe condition on an
aviation product. The MCAI describes
the unsafe condition as:
SUMMARY:
The TC Holder received from operators,
whose fleets are operated in demanding
operating-conditions and with very frequent
Short Take-Off and Landing (STOL)
operations, reports of cracks located in the
web of fuselage frame 19. On 05 February
2007, EASA issued Airworthiness Directive
(AD) 2007–0028 which mandated Alert
Service Bulletin (ASB) 228–266 and required
an inspection of the frame 19 on all Dornier
228 aeroplanes. In addition, the TC Holder
also initiated a flight-test campaign including
strain measurements as well as finite element
modelling and fatigue analyses to better
understand the stress distribution onto the
frame 19 and the associated structural
components.
The results of these investigations
confirmed that STOL operations diminish
extensively the fatigue life of the frame 19.
Fuselage frame 19 supports the rear
attachment of the Main Landing Gear (MLG).
This condition, if not corrected, could cause
rupture of frame 19, leading to subsequent
collapse of a MLG.
The proposed AD would require actions
that are intended to address the unsafe
condition described in the MCAI.
DATES: We must receive comments on
this proposed AD by January 3, 2011.
ADDRESSES: You may send comments by
any of the following methods:
• Federal eRulemaking Portal: Go to
https://www.regulations.gov. Follow the
instructions for submitting comments.
• Fax: (202) 493–2251.
• Mail: U.S. Department of
Transportation, Docket Operations,
M–30, West Building Ground Floor,
Room W12–140, 1200 New Jersey
Avenue, SE., Washington, DC 20590.
• Hand Delivery: U.S. Department of
Transportation, Docket Operations,
M–30, West Building Ground Floor,
Room W12–140, 1200 New Jersey
Avenue, SE., Washington, DC 20590,
between 9 a.m. and 5 p.m., Monday
through Friday, except Federal holidays.
For service information identified in
this proposed AD, contact RUAG
Aerospace Services GmbH, Dornier 228
Customer Support, P.O. Box 1253,
82231 Wessling, Germany; telephone: +
49 (0) 8153–302280; fax: + 49 (0) 8153–
303030. You may review copies of the
referenced service information at the
PO 00000
Frm 00008
Fmt 4702
Sfmt 4702
70623
FAA, Small Airplane Directorate, 901
Locust, Kansas City, Missouri 64106.
For information on the availability of
this material at the FAA, call 816–329–
4148.
Examining the AD Docket
You may examine the AD docket on
the Internet at https://
www.regulations.gov; or in person at the
Docket Management Facility between
9 a.m. and 5 p.m., Monday through
Friday, except Federal holidays. The AD
docket contains this proposed AD, the
regulatory evaluation, any comments
received, and other information. The
street address for the Docket Office
(telephone (800) 647–5527) is in the
ADDRESSES section. Comments will be
available in the AD docket shortly after
receipt.
FOR FURTHER INFORMATION CONTACT: Greg
Davison, Glider Program Manager, FAA,
Small Airplane Directorate, 901 Locust,
Room 301, Kansas City, Missouri 64106;
telephone: (816) 329–4130; fax: (816)
329–4090.
SUPPLEMENTARY INFORMATION:
Comments Invited
We invite you to send any written
relevant data, views, or arguments about
this proposed AD. Send your comments
to an address listed under the
ADDRESSES section. Include ‘‘Docket No.
FAA–2010–1152; Directorate Identifier
2009–CE–026–AD’’ at the beginning of
your comments. We specifically invite
comments on the overall regulatory,
economic, environmental, and energy
aspects of this proposed AD. We will
consider all comments received by the
closing date and may amend this
proposed AD because of those
comments.
We will post all comments we
receive, without change, to https://
regulations.gov, including any personal
information you provide. We will also
post a report summarizing each
substantive verbal contact we receive
about this proposed AD.
Discussion
On May 11, 2007, we issued AD
2007–11–03, Amendment 39–15060 (72
FR 28591; May 22, 2007). That AD
required actions intended to address an
unsafe condition on the products listed
above.
Since we issued AD 2007–11–03, the
type certificate holder initiated a series
of flight-test analyses to include strain
measurements as well as finite element
modeling and fatigue analyses to better
understand the stress distribution onto
frame 19 and the associated structural
components. The analyses’ findings
confirmed that extreme short take-off
E:\FR\FM\18NOP1.SGM
18NOP1
]]>Agencies
[Federal Register Volume 75, Number 222 (Thursday, November 18, 2010)]
[Proposed Rules]
[Pages 70619-70623]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-29025]
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FARM CREDIT ADMINISTRATION
12 CFR Parts 612, 620, and 630
RIN 3052-AC41
Standards of Conduct and Referral of Known or Suspected Criminal
Violations; Disclosure to Shareholders; and Disclosure to Investors in
System-Wide and Consolidated Bank Debt Obligations of the Farm Credit
System; Compensation, Retirement Programs, and Related Benefits
AGENCY: Farm Credit Administration.
ACTION: Advance notice of proposed rulemaking (ANPRM).
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SUMMARY: The Farm Credit Administration (FCA, we, or our) is requesting
comments on ways to clarify or otherwise enhance our regulations
related to Farm Credit System (System) institutions' disclosures to
shareholders and investors on compensation, retirement programs and
related benefits for senior officers, highly compensated individuals,
and certain individual employees or other groups of employees. We are
also seeking comments on whether we should issue new regulations in
related areas. In keeping with today's financial and economic
environment, we believe it prudent and timely to undertake a review of
our regulatory guidance on the identified areas. We intend to consider
the information and suggestions we receive in response to this ANPRM
when developing a rulemaking on compensation disclosures and related
areas.
DATES: You may send comments on or before March 18, 2011.
ADDRESSES: We offer a variety of methods for you to submit your
comments. For accuracy and efficiency reasons, commenters are
encouraged to submit comments by e-mail or through the FCA's Web site.
As facsimiles (fax) are difficult for us to process and achieve
compliance with section 508 of the Rehabilitation Act, we are no longer
accepting comments submitted by fax. Regardless of the method you use,
please do not submit your comments multiple times via different
methods. You may submit comments by any of the following methods:
E-mail: Send us an e-mail at reg-comm@fca.gov.
FCA Web site: https://www.fca.gov. Select ``Public
Commenters,'' then ``Public Comments,'' and follow the directions for
``Submitting a Comment.''
Federal eRulemaking Portal: https://www.regulations.gov.
Follow the instructions for submitting comments.
Mail: Gary K. Van Meter, Deputy Director, Office of
Regulatory Policy, Farm Credit Administration, 1501 Farm Credit Drive,
McLean, VA 22102-5090.
You may review copies of all comments we receive at our office in
McLean, Virginia or on our Web site at https://www.fca.gov. Once you are
in the Web site, select ``Public Commenters,'' then ``Public
Comments,'' and follow the directions for ``Reading Submitted Public
Comments.'' We will show your comments as submitted, including any
supporting data provided, but for technical reasons we may omit items
such as logos and special characters. Identifying information that you
provide, such as phone numbers and addresses, will be publicly
available. However, we will attempt to remove e-mail addresses to help
reduce Internet spam.
FOR FURTHER INFORMATION CONTACT:
Deborah A. Wilson, Senior Accountant, Office of Regulatory Policy,
Farm Credit Administration, McLean, VA 22102-5090, (703) 883-4414, TTY
(703) 883-4434, or
Laura McFarland, Senior Counsel, Office of General Counsel, Farm
Credit Administration, McLean, VA 22102-5090, (703) 883-4020, TTY (703)
883-4020.
SUPPLEMENTARY INFORMATION:
I. Objective
The objective of this ANPRM is to gather information for the
development of a rulemaking that could result in:
Enhancing the transparency and consistency of disclosures
related to System institution compensation policies and practices \1\
for senior officers,\2\ highly compensated individuals,\3\ and/or
certain other groups of employees whose activities, either individually
or in the aggregate, are reasonably likely to materially impact an
institution's financial performance and risk profile;
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\1\ 12 CFR 620.5(i).
\2\ All references to senior officer(s) in this ANPRM refer to a
senior officer as defined in 12 CFR 619.9310.
\3\ All references to highly compensated individuals in this
ANPRM refer to those officers described in 12 CFR 620.5(i)(2)(i)(B).
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Clarifying and enhancing the authorities and
responsibilities of System institution compensation committees \4\ in
furtherance of their oversight activities;
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\4\ All references to compensation committees in this ANPRM
refer to compensation committees as set forth in 12 CFR 620.31 and
12 CFR 630.6(b).
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Increasing user-control in System institutions'
compensation policies and practices by providing for a non-binding
shareholder vote on senior officer compensation;
Requiring timely notice to interested parties of
significant events, facts or circumstances occurring at a System
institution between required reporting periods;
Addressing the appropriateness of, and enhancing the
disclosure of, certain payments to System institution directors; and
Providing audit committees greater authority to access
external resources when needed.
II. Background
The Farm Credit Act of 1971, as amended (Act),\5\ authorizes the
FCA to issue regulations implementing the provisions of the Act,
including those provisions that address System institution disclosures
to shareholders and investors. Our regulations are intended to ensure
the safe and sound operations of System institutions and govern the
disclosure of financial information to shareholders of, and investors
in, the Farm Credit System.\6\ Congress explained in section 514 of the
Farm Credit Banks and Associations Safety and Soundness Act of 1992
(1992 Act) \7\ that disclosure of financial information and the
reporting of potential conflicts of interest by institution directors,
officers, and employees help ensure the financial viability of the
System. In the 1992 Act, Congress required that we review our
regulations to ensure that System institutions provide adequate
disclosures to shareholders and other interested parties. We completed
this initial review in 1993 making appropriate amendments to our
[[Page 70620]]
``Standards of Conduct'' regulations (59 FR 24889, May 13, 1994), our
``Disclosure to Shareholders'' regulations (59 FR 37406, July 22,
1994), and our ``Disclosure to Investors in System-wide and
Consolidated Bank Debt Obligations of the Farm Credit System''
regulations (59 FR 46742, September 12, 1994). We continue to
periodically review and update our disclosure regulations to ensure
they are appropriate for current business practices, that they ensure
System institutions provide their shareholders with information to
assist them in making informed decisions regarding the operations of
the institutions, and that the disclosures provide investors with
information necessary to assist them in making investment decisions.
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\5\ Public Law 92-181, 85 Stat. 583, 12 U.S.C. 2001 et seq.
\6\ Section 5.17(a)(8), (9) and (10) of the Act. 12 U.S.C.
2252(a)(8)(9) and (10).
\7\ Public Law 102-552, 106 Stat. 4131.
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In keeping with today's economic and business environments and in
accordance with the findings of Congress under the 1992 Act, we believe
it is prudent and timely to undertake a review of our regulatory
guidance related to senior officer compensation. The recent turmoil
within the financial industry and the ensuing decline in the economy
highlight the need to ensure that shareholders and investors are
informed of compensation policies and practices. Shareholders and
investors need information that allows them to assess which policies
and practices encourage excessive risk-taking at the expense of the
institution's safety and soundness. With appropriate information,
shareholders and investors can evaluate whether the institution's
compensation policies and practices create an environment in which
employees take imprudent risks in order to maximize their expected
income at the expense of the institution's earnings performance and
shareholder return. Similar efforts are in process at other regulatory
agencies. For example, the Securities and Exchange Commission (SEC)
recently revised its regulations to require that issuers disclose their
compensation policies and practices as they relate to the company's
risk management.\8\ Likewise, the Board of Governors of the Federal
Reserve System (FRB) has undertaken two supervisory initiatives
involving a review of incentive compensation practices at certain
banking organizations. The FRB has issued supervisory guidance designed
to ensure that incentive compensation policies at banking organizations
supervised by the FRB do not encourage imprudent risk-taking and are
consistent with the safety and soundness of the organization.\9\ Also,
the recently enacted Dodd-Frank Wall Street Reform and Consumer
Protection Act (Wall Street Reform Act) \10\ includes amendments to the
Securities Exchange Act of 1934 requiring, among other things, a
separate resolution subject to a non-binding shareholder vote on the
compensation of executive officers of a SEC issuer.\11\ In addition,
under the Wall Street Reform Act, each SEC issuer is required to
disclose information that shows the relationship between executive
compensation actually paid and the financial performance of the
reporting entity.\12\
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\8\ See SEC Release No. 33-9089, ``Proxy Disclosure and
Enhancements,'' issued February 28, 2010.
\9\ Board of Governors of the Federal Reserve System, Docket No.
OP-1374, ``Guidance on Sound Incentive Compensation Policies,'' June
21, 2010.
\10\ Public Law 111-203, 124 Stat. 1376.
\11\ See section 951 of Subtitle E of Title IX, ``Investor
Protections and Improvements to the Regulation of Securities,'' of
the Wall Street Reform Act.
\12\ See section 953 of Subtitle E of Title IX, ``Investor
Protections and Improvements to the Regulation of Securities,'' of
the Wall Street Reform Act.
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Active, effective oversight of senior officer compensation policies
and practices will help align those policies and practices with safe
and sound operations. Providing transparent, timely and accurate
disclosures of senior officer compensation policies and practices will
help ensure an institution adequately fulfills its obligation to its
shareholders and investors.
III. Areas of Consideration
We are reviewing our regulations in order to identify where our
disclosure regulations might be amended to enhance the transparency of
an institution's compensation policies and practices and if those
practices affect the safety, soundness and financial performance of the
institution. Also, we are reviewing our regulations to determine if
they should be amended to facilitate qualified, objective and active
compensation committees that are tasked to oversee an institution's
compensation programs. We are interested in public response to the
questions contained in this ANPRM, including ways in which our
regulations might further enhance disclosures of senior officer
compensation policies and practices. We are also interested in the ways
in which an institution's compensation committee might further engage
in active and effective oversight of those policies and practices.
A. Enhanced Disclosures of Senior Officer Compensation
Our existing disclosure regulations at Sec. Sec. 620.5(i) and
630.20(i) require that certain disclosures of compensation paid to, or
earned by, senior officers and other highly compensated employees
(hereinafter collectively referred to as ``senior officers'') be
included in an institution's annual report to shareholders (or an
association's annual meeting information statement). Our regulations
also require disclosure of certain benefits paid to senior officers
pursuant to a plan or arrangement in connection with resignation,
retirement, or termination. However, depending on when an officer
retires (or otherwise terminates employment with the institution), the
payment may not be disclosed or it may not be disclosed in a timely
manner due to the timing of the actual payment to the officer. As a
result, shareholders and investors may not have all the information
they need to make informed decisions on an institution's compensation
policies and practices for senior officers.
We are considering whether current required disclosures should be
changed to include quantitative and qualitative information on the
obligations that have accrued to an institution from senior officers'
supplemental retirement and deferred compensation plans. Also, we want
to identify how the disclosures could provide greater clarity to the
variable components of senior officers' compensation packages. We
believe disclosures should provide information that assists
shareholders and investors in understanding the impact of compensation
programs on an institution's operations. Shareholders and investors
require sufficient information to assess whether senior officers'
compensation is appropriate in view of the institution's financial
condition, risk profile, and business activities. This information
enables shareholders to understand how an institution's board or
compensation committee exercises its oversight responsibilities of
ensuring a comprehensive and balanced compensation program that holds
management accountable for an institution's financial performance.
Questions (1) through (8) of Section IV of this ANPRM address this
topic.
B. Compensation Committees
Our existing rules at Sec. Sec. 620.31 and 630.6(b) require that
System institutions have compensation committees and that these
committees be responsible for reviewing the compensation policies and
plans for senior officers and employees, as well as approving the
overall compensation program for senior officers. Compensation
committee oversight is critical in ensuring compensation policies and
practices do not jeopardize an institution's safety
[[Page 70621]]
and soundness. In FCA bookletter, ``Compensation Committees'' (BL-060),
dated July 9, 2009, we issued guidance on how compensation committees
could fulfill these duties. We are considering incorporating this
guidance into our existing rules. We are also considering additional
ways to enhance the authorities and responsibilities of System
institution compensation committees to continue to achieve active and
effective oversight of senior officers' compensation policies and
practices. For example, in order for compensation committees to
effectively fulfill their role, they must be specifically tasked with
ensuring that compensation policies and practices do not jeopardize the
safety and soundness of the institution. We are considering ways to re-
emphasize that oversight responsibility. Understanding the financial
commitment and total cost to the institution of the compensation
programs and verifying that the institution is providing accurate and
transparent disclosures on compensation are appropriate tasks for a
compensation committee.
We are aware that some System institutions engage compensation
consultants to make recommendations on compensation programs, plans,
policies and practices. Compensation consultants can provide
significant expertise to the board or compensation committee on
compensation matters. These same consultants may also provide
additional services, such as administration of compensation and benefit
programs or actuarial services, on behalf of an institution's
management. The degree of reliance placed on the consultant's expertise
by the compensation committee may be a function of the consultant's
independence from management influence. Therefore, we are considering
requiring disclosure of the additional services provided to management
by the consultant and requiring that the related fees paid to the
consultant be disclosed. We are also considering if the significance of
these additional services should impact whether they are included in
the compensation disclosures.
Questions (9) through (13) of Section IV of this ANPRM address this
topic.
C. Shareholder Approval of Senior Officers' Compensation
Recent initiatives, such as the Wall Street Reform Act, require
entities that are SEC issuers to include a separate resolution in their
proxy solicitations subject to shareholder vote on the compensation of
the entities' executives. We are considering whether the FCA should
issue regulations requiring a separate, non-binding, advisory
shareholder vote on senior officer compensation and, if so, what those
regulations should require. By providing for a non-binding advisory
vote, shareholders would have a process through which they could
express their approval or disapproval of an institution's compensation
policies and practices. Board oversight and governance of compensation
policies and practices may be more effective and enhanced if the board
is explicitly informed of shareholder approval or disapproval. A non-
binding, advisory shareholder vote would not bind the board of
directors or compensation committee to any particular course of action
and would not overrule any board or committee decisions related to
senior officers' compensation.
Submitting senior officer compensation to a non-binding, advisory
shareholder vote may be a practice that is appropriate for institutions
that are cooperatively structured. One of the core cooperative
principles is that those who use the cooperative should also control
it. Submitting senior officer compensation to an advisory vote by
System institution shareholders may promote member participation in
their institution.
Question (14) of Section IV of this ANPRM addresses this topic.
D. Notice of Significant or Material Events
The FCA promotes sound governance practices. In doing so, we
believe interested parties deserve timely notice and disclosure of any
event, fact or circumstance that boards and management consider
material or significant to the operations or financial condition of
their institution. The SEC requires its registrants to file, in a
timely manner, a current report to announce major events that occur
between reporting periods (i.e., the Form 8-K, Current Report). We are
considering requiring System institutions to provide similar current
reporting on intervening events that occur between annual and quarterly
reporting periods. The intervening events we are considering include
enforcement actions taken by or supervisory agreements with the FCA,
departure of an institution's director or an officer, results of
matters an institution may submit to a vote by its shareholders, and
other similar events.
Question (15) of Section IV of this ANPRM addresses this topic.
E. Remuneration to Boards of Directors in Connection With Conclusion of
Services
Section 612.2130(b) of our regulations defines a conflict of
interest, or the appearance thereof. The rule states that a conflict
exists, or may appear to exist, when a person has a financial interest
in a transaction, relationship or activity that actually affects, or
has the appearance of affecting, the person's ability to perform
official duties and responsibilities in a totally impartial manner and
in the best interest of the institution. Payments to a director in
connection with a restructuring or downsizing of the board or as a
result of a merger, consolidation or other form of institutional
reorganization may result in a board member having, or appearing to
have, a conflict of interest or lack of total independence related to
the transaction or board action. Shareholders and boards have approved
such payments for economic reasons or when they wanted to recognize the
contributions of directors stepping down from the board. We are
considering regulating payments to directors under certain
circumstances and also considering how or if these payments should be
disclosed.
Question (16) of Section IV of this ANPRM addresses this issue.
F. Audit Committees
Sections 620.30(c) and 630.6(a)(3) of the FCA's regulations require
a two-thirds majority vote of the full board of directors of a bank, an
association or the Federal Farm Credit Banks Funding Corporation
(Funding Corporation) to deny its respective audit committee's request
for resources. We are considering whether we should remove the ability
of the full board to deny a request from its audit committee for
external resources.\13\ We are considering this matter based on a May
7, 2010, request from the Funding Corporation submitted on behalf of
the System Audit Committee (SAC), asking us to amend Sec. 630.6(a)(3)
of our regulations to remove the authority of the board of directors of
the Funding Corporation to deny the SAC certain resources.
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\13\ External resources may include, but not be limited to,
outside advisors, consultants, or legal counsel.
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Question (17) of Section IV of this ANPRM addresses this request.
IV. Request for Comments
We request and encourage any interested person(s) to submit
comments on the following questions and ask that you support your
comments with relevant data or examples. We remind
[[Page 70622]]
commenters that comments, and data submitted in support of a comment,
are available to the public through our rulemaking files.
(1) Should FCA enhance senior officer compensation disclosure
requirements to improve transparency and current practices?
Specifically, should the FCA consider enhancing disclosures on:
(a) The significant terms of senior officers' employment
arrangements, whether or not dollar amounts are paid or earned during
the reporting year, including components related to deferred
compensation plans, supplemental retirement plans, performance
agreements, and incentive or bonus compensation based on financial
information; and
(b) The position titles of officers included in the aggregated
group's compensation reported under existing Sec. 620.5(i)(2)(i)(B) of
our regulations?
(2) Should the FCA remove from Sec. 620.5(i)(2) the option that
allows associations to disclose senior officer compensation information
in annual meeting information statements instead of disclosing it in
annual reports?
(3) What additional disclosures (qualitative and quantitative) are
needed to ensure that all compensation, including deferred compensation
and supplemental retirement benefits, are fully disclosed in a timely
manner and that an institution's total compensation policies,
practices, and obligations for senior officers are effectively
communicated in a transparent and timely manner?
(4) Should FCA require the disclosure of compensation policies and
practices related to the activities of certain employees, other than
senior officers, which, either individually or in the aggregate, may
expose the institution to a material amount of adverse risk? If so,
what disclosures are needed to ensure the compensation programs,
practices, and incentives for such employees are adequately disclosed
so that shareholders and investors are informed of the potential risk
areas?
(5) To enhance transparency and a comprehensive understanding of
the link between risk, return, and compensation incentives, should a
discussion of an institution's overall risk and reward structure for
senior officer compensation and benefit policies and practices be a
required disclosure and, if so, what level of disclosure or qualitative
information should be required?
(6) To ensure that all sources of compensation are disclosed,
should institutions be required to disclose estimated payments to be
made in the future to each senior officer in connection with deferred
compensation arrangements, performance or incentive awards, and/or
supplementary retirement benefits? If so, how should the disclosures be
presented and for what periods? What other sources of senior officer
compensation should be captured in current financial disclosures to
shareholders?
(7) To ensure that shareholders and investors have an appropriate
understanding of the assumptions used by the institution to determine
estimated future payments for compensation or benefits, if disclosed,
should the assumptions used to determine the future payments also be
disclosed? If so, should the disclosure include why the assumptions
used to determine the estimated payments are different from those used
to determine the present value of dollar amounts disclosed in the
Summary Compensation Table?
(8) Should institutions be required to disclose:
(a) The dollar amount of any tax reimbursements (such as Internal
Revenue Code Section 280G tax gross-ups) provided by the institution to
a senior officer;
(b) The business reason(s) for any material or significant change
or adjustment to compensation or benefit programs from prior periods
that increase or decrease salaries or compensation programs
(individually or in the aggregate);
(c) Quantitative and qualitative benchmarks used to determine
senior officer compensation and performance and incentive bonuses, if
and why benchmarks used in the current reporting period were different
from those used in prior periods, the business reason(s) for changing
the benchmarks used, whether the individual officer was successful in
attaining the requirements of the benchmark used, and if and how each
benchmark relates to the financial performance of the institution;
(d) Significant events, trends or other information necessary to
understand the institution's senior officer compensation policies and
practices; and
(e) The vesting periods for long-term incentive and/or performance
compensation or retirement benefits?
(9) To support the compensation committee's review and
accountability processes, should compensation committees be required to
certify compensation disclosures? If so, should the certification
include a statement to the effect that:
(a) The compensation disclosures are true, accurate, and complete,
and that the disclosures are in compliance with all applicable
regulatory requirements;
(b) Comparable compensation practices used by the institution to
develop its compensation policies support the valuation of senior
officer compensation; and
(c) The institution's compensation policies and practices are
consistent with the adverse risk-bearing capacity of the institution
(as determined by the institution's board) and do not pose a threat to
the safety and soundness of the institution?
(10) If compensation committees are required to certify
compensation disclosures, what other areas should be addressed in the
certification and what related statements should the committee certify?
(11) Would it strengthen the operation and independence of the
compensation committee if the FCA required that at least one of the
compensation committee members be an outside director (independent of
any affiliation with the institution other than serving as a director)?
What would be the benefits and/or concerns with such a requirement?
(12) If a System institution compensation committee uses the
services of a compensation consultant, would the disclosure of that
information be meaningful to shareholders and investors? What types of
disclosures should be provided?
(13) If institution management engages the services of a
compensation consultant that is also used by the compensation
committee, or vice versa, should that fact be disclosed? If so, should
the disclosure include a description of the additional services
provided by the consultant for management that:
(a) Benefits the institution as a whole, and
(b) Are provided solely for management's benefit? Should the
consultant's fees for the additional services be disclosed if those
fees are in excess of de minimis amounts?
(14) To enhance transparency and shareholder understanding of
compensation programs and practices, should FCA's regulations provide
for a separate, non-binding advisory vote by System institution voting
shareholders on senior officer compensation? If so:
(a) When and how should the vote occur;
(b) Within what timeframe should the results of the vote be
reported to shareholders;
(c) Should certain System institutions be exempt from the voting
requirement and, if so, what criteria should be used to exempt those
institutions; and
(d) If a vote is required, should institutions be required to
identify
[[Page 70623]]
senior officer compensation amounts on an individual basis to
facilitate the vote? \14\
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\14\ 12 CFR 620.5(i)(2)(i)(B) allows aggregated disclosure in
the annual report of compensation paid to senior officers.
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(15) Should System institutions be required to issue current
reports on events, facts, or circumstances that management considers
material or significant to the operations or financial condition of a
System institution, similar to the notice on changes in capital levels
described in Sec. 620.15? \15\ If so, what form should the report
take, what types of events should be reported, and what timeframe would
be appropriate for its issuance?
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\15\ 12 CFR 620.15 provides for the notice to the FCA and
shareholders by System banks and associations when an institution is
not in compliance with the minimum permanent capital standards
required by the FCA.
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(16) To ensure that certain payments to institution directors do
not create the potential for a conflict of interest, or appearance
thereof, should payments made to System institution directors in
connection with a restructuring or downsizing of the board, or as a
result of a merger, consolidation or other form of institutional
reorganization be allowed or disallowed?
(a) Under what circumstances would such payments constitute a
conflict of interest or an appearance thereof?
(b) If allowed, how and when should such payments be disclosed?
(17) Should FCA remove from Sec. Sec. 620.30(c) and 630.6(a)(3)
the ability of a board of directors to deny a request for resources
from its audit committee?
Dated: November 12, 2010.
Mary Alice Donner,
Acting Secretary, Farm Credit Administration Board.
[FR Doc. 2010-29025 Filed 11-17-10; 8:45 am]
BILLING CODE 6705-01-P
