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Dodd-Frank Passes, Now the Wait for Rules

The Senate passed the Dodd-Frank Wall Street Reform and Consumer Protection Act on July 15, sending the legislation to the desk of President Obama, who signed it into law on July 21. Although the new law will have a significant impact on governance issues, the final draft contained nothing unexpected.

"I can't say that there's a lot of surprise about what did make in through," says Gary Brown, a shareholder at Baker Donelson. "There were some things that didn't make it through, like majority voting, which was in the original version of the senate bill."

Say-on-pay provisions will take effect in 2011. Most companies will have to hold a non-binding shareholder vote on the compensation packages of executives whose salary and benefits must be disclosed on proxy statements. That's not the only aspect of executive compensation that will be more closely prescribed.

"One area where people will have to start acting differently is the compensation committee and its advisors," Brown says. "Dodd-Frank essentially puts the compensation committee and outside advisors on the same footing as the audit committee and independent auditors."

Dodd-Frank also requires new disclosures on the separation of chair and CEO roles, and on so-called golden parachute severance packages.

Proxy access is being held out as perhaps the most significant change, and critics fear it will allow more union influence at some companies. But Brown says it's too soon to say what form new regulations will ultimately take.

"There's a huge amount of rulemaking that's going to come out of Dodd-Frank," he says, "and I can't say that's inappropriate. Congress is not very well versed in a lot of the details, and when they try to do the details, they get it wrong. So it's probably good to leave that to the agencies."

Staff Writer

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