Key issues: Financial regulatory reform

Just more than one year after President Obama signed the landmark Dodd-Frank Act, regulators are undertaking the long, laborious task of rulemaking. Such regulators as the SEC, the Commodity Futures Trading Commission, FDIC and Federal Reserve have been charged with writing more than 500 rules under Dodd-Frank. As of December 1, 2011, 65 final rules have been written. The SEC alone has adopted 18 of those rules, with many others either have been proposed or scheduled to be proposed in 2012. The Act also requires 60 studies and 90 reports to be issued. Also, the Consumer Financial Protection Bureau and Office of the Whistleblower were established. However, the Office of the Whistleblower, as well as the whole commission, still faces budgetary constraints going forward.

Among the corporate governance areas that Dodd-Frank mandates are shareholder proxy access for director nomination (which was successfully challenged in federal court to allow proxy access through private ordering), shareholder nonbinding "say on pay" votes for executive compensation and golden parachutes, executive compensation clawback policies, requirements for compensation committee and advisor independence, and disclosure for certain employees and directors on hedging activities.

In addition to these mandates, the SEC has issued rules regarding say on pay and golden parachutes, whistleblower protection and bounty program, and registration requirements for investment advisors. Over the next six months, the SEC plans on adopting rules on recovery of executive compensation (clawback), disclosure of pay-for-performance, pay ratios and hedging by employees and directors, and disclosure of "conflict minerals" in a company's supply chain.

PwC perspective

John Barry
"The SEC has proposed numerous rules and regulations since Dodd-Frank was enacted, successfully implementing several in 2011. Growing shareholder concerns about the way companies are being run contributed to the call for more board accountability. Boards will want to stay abreast of current developments relative to the rulemaking process.”
— John Barry, Leader, Center for Board Governance

Other key issues

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