More than two years after President Obama signed the landmark Dodd-Frank Act into law, the SEC has continued to write rules pertaining to corporate governance. And given that the SEC is only one-third of the way through the process, there are still many more rules that have yet to be written.
In 2012, the SEC finalized rules requiring the listing exchanges (NYSE and NASDAQ) to add listing standards for compensation committee member independence and committee advisor independence requirements. The two exchanges have subsequently approved those standards, which go into effect over the next two years.
The commission also wrote a rule that requires public companies to disclose whether they use conflict minerals (tantalum, tin, tungsten, and gold) and whether the minerals originated in the Democratic Republic of the Congo (DRC) or adjoining countries. It responds to concerns that conflict minerals mined in these “covered countries” help finance armed groups that are responsible for violence in the region. Business organizations have since challenged the rule in federal court using the same strategy they did in successfully overturning the Dodd-Frank Act rule on shareholder proxy access for director nominations.
In summary, there are many Dodd-Frank mandates affecting boards including rules on conflict minerals disclosure, proxy access, compensation committee composition and committee advisor independence requirements. Other Dodd-Frank mandates have included shareholder nonbinding "say on pay" votes for executive compensation and golden parachutes, executive compensation clawback policies, CEO/employee pay ratio disclosures and disclosure for certain employees and directors on hedging activities. But the SEC has yet to write the rules on clawback policies and CEO/employee pay ratio disclosures.
"The SEC continues to issue rules and regulations related to Dodd-Frank, but many rules on corporate governance are still to be written. Boards should continue to keep an eye on current developments relative to the rulemaking process."
— Mary Ann Cloyd, Leader, Center for Board Governance
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