The Dodd-Frank Wall Street Reform and Consumer Protection Act has had far-reaching effects on businesses in the U.S. since it went into effect in 2010. Aimed at regulating financial bodies to prevent another crisis as experienced in the years prior, certain measures have been put in place to keep tighter tabs on the practices of financial institutions and companies. Public companies face some different rules from private ones, and shareholder roles have shifted somewhat since the implementation of Dodd-Frank.
Jeffrey London, a Kaye Scholer Partner, shed some light on the changes that have been occurring as the reforms take hold. Largely, shareholder engagement is one of the biggest trends stemming from the law. London notes that the “say on pay” vote — where shareholders approve the remuneration of executives — has had an impact on the engagement of shareholders overall. The say-on-pay votes are publicized and are seen as drivers of reputation for companies. Even though the votes are nonbinding, public embarrassment is mostly at stake should compensation be voted down, or should approval ratings not favor executives.