On February 13, 2012, the staff of the US Securities Exchange Commission’s Division of Corporation Finance issued the following Compliance and Disclosure Interpretation addressing how the advisory say-on-pay vote should be presented on proxy cards:

Question 169.07

Question: On its proxy card and voting instruction form, how should a company describe the advisory vote to approve executive compensation that is required by Exchange Act Rule 14a-21?

Answer: The following are examples of advisory vote descriptions that would be consistent with Rule 14a-21’s requirement for shareholders to be given an advisory vote to approve the compensation paid to a company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K.

  • To approve the company’s executive compensation
  • Advisory approval of the company’s executive compensation
  • Advisory resolution to approve executive compensation
  • Advisory vote to approve named executive officer compensation

The following is an example of an advisory vote description that would not be consistent with Rule 14a-21 because it is not clear from the description as to what shareholders are being asked to vote on.

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•  To hold an advisory vote on executive compensation

In this Compliance and Disclosure Interpretation, the staff explained that shareholders could interpret the immediately above negative example “as asking them to vote on whether or not the company should hold an advisory vote on executive compensation, rather than asking shareholders to actually approve, on an advisory basis, the compensation paid to the company’s named executive officers.”

Practical Consideration: Public companies should review their proxy cards to determine if their presentation of the say-on-pay vote is in a form that has been endorsed by the staff of the SEC and, if not, whether it is consistent with the intent of the requirements of Rule 14a-21.

If you have any questions about the presentation of the say-on-pay vote on proxy cards, please contact the author of this Legal Update, Laura D. Richman, at +1 312-701-7304, or your regular Mayer Brown lawyer.

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