Key issues: Financial regulatory reform

More than three years after President Obama signed the landmark Dodd-Frank Act into law, the SEC continues to write rules pertaining to corporate governance. The new SEC Chair Mary Jo White has made Dodd-Frank rulemaking a priority in her first year.

Some of the rules expected to be finalized and, in some cases, implemented this year involve executive compensation clawback policies, disclosure for certain employees and directors about their hedging activities, and CEO compensation, pay for performance disclosures, and conflict minerals. The SEC is also due to issue a report to Congress on the study and review of compensation consultants.

In addition, at the end of 2013, the SEC along with four other federal agencies (the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, and the Commodity Futures Trading Commission) issued the long-awaited Volcker Rule. The rule, which is named after former Federal Reserve Chair Paul Volcker, prohibits insured depository institutions and companies affiliated with insured depository institutions from engaging in short-term proprietary trading of certain securities, derivatives, commodity futures and options on these instruments for their own account.

The SEC has proposed rules that would require public companies to disclose the median of the annual total compensation of all employees, the annual total compensation of the CEO and the ratio of these two amounts. The proposed disclosure would be required in any annual report, proxy or information statement or registration statement that requires executive compensation disclosures but would not apply to emerging growth companies, smaller reporting companies, or foreign private issuers.

In 2014, Dodd-Frank rules that require the listing exchanges (NYSE and NASDAQ) to add listing standards for compensation committee member independence and committee advisor independence requirements go into effect. Another rule scheduled to go into effect this year requires public companies to disclose use of conflict minerals (tantalum, tin, tungsten, and gold) and whether the minerals originated in the Democratic Republic of the Congo (DRC) or adjoining countries.

In summary, there are many open Dodd-Frank mandates and proposed rules affecting boards and their companies that continue to impact them in the near term.

PwC perspective

"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

Other key issues

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