109 HR 4291 IH: Protection Against Executive Compensation Abuse Act U.S. House of Representatives 2005-11-10 text/xml EN Pursuant to Title 17 Section 105 of the United States Code, this file is not subject to copyright protection and is in the public domain.

I 109th CONGRESS 1st Session H. R. 4291 IN THE HOUSE OF REPRESENTATIVES November 10, 2005 Mr. Frank of Massachusetts (for himself, Mr. George Miller of California, Mr. Obey, Mr. Rangel, Mr. Sabo, and Ms. Velázquez) introduced the following bill; which was referred to the Committee on Financial Services A BILL To amend the Securities Exchange Act of 1934 to require additional disclosure to shareholders of executive compensation.

1.

Short title

This Act may be cited as the Protection Against Executive Compensation Abuse Act.

2.

Additional executive compensation disclosures

(a)

Amendment

Section 16 of the Securities Exchange Act of 1934 (15 U.S.C. 78n) is amended by adding at the end the following new subsection: (i)

Additional executive compensation disclosures

(1)

Compensation plan

(A)

Annual statements and proxy materials

Each issuer required to file an annual report under section 13(a) shall include in such annual report, and in any proxy solicitation materials accompanying a proxy solicitation on behalf of the management of the issuer in connection with an annual or other meeting of the holders of the securities of the issuer, a comprehensive statement of such issuer’s compensation plan for the principal executive officers of the issuer. Such compensation plan shall include— (i)any type of compensation (whether present, deferred, or contingent) paid or to be paid to such principal executive officers, including— (I)an estimate of the present value of any accrued pension of such officers; (II)the estimated market value of any other benefits received by such officers; and (III)any agreements or understandings concerning any type of compensation; (ii)the short- and long-term performance measures that the issuer uses for determining the compensation of such principal executive officers and whether such measures were met by such officers during the preceding year; and (iii)the policy of the issuer adopted pursuant to the rules promulgated under paragraph (3). (B)

Shareholder approval

The proxy solicitation materials containing the statement required by subparagraph (A) shall require a separate shareholder vote to approve such compensation plan. (2)

Shareholder approval of golden parachute compensation

In any proxy solicitation material that concerns an acquisition, merger, consolidation, or proposed sale or other disposition of substantially all the assets of an issuer— (A)the person making such solicitation shall disclose in the proxy solicitation material, in a clear and simple form in accordance with regulations of the Commission, any agreements or understandings that such person has with any principal executive officers of such issuer (or of the acquiring issuer, if such issuer is not the acquiring issuer) concerning any type of compensation (whether present, deferred, or contingent) that are based on or otherwise relate to the acquisition, merger, consolidation, sale, or other disposition; and (B)such proxy solicitation material shall require a separate shareholder vote to approve such agreements or understandings. (3)

Return of certain compensation

The Commission shall prescribe rules requiring each issuer to adopt a policy requiring the reimbursement by any principle executive officer to the issuer of any compensation received by such officer that is— (A)not provided for in the compensation plan required by paragraph (1); (B)based on performance by the officer that does not meet the job performance measures identified in such statement; (C)incentive compensation or bonuses received by such officer within 18 months before any negative material restatement by the issuer; or (D)related to fraud or misrepresentation on the part of such officer. (4)

Principal executive officer

For purposes of this subsection, the term principal executive officer means— (A)all individuals serving as the chief executive officer of an issuer, or acting in a similar capacity, during the most recent fiscal year, regardless of compensation level; and (B)for an issuer with total assets of— (i)more than $250,000,000 but less than $500,000,000, the 2 most highly compensated executive officers, other than an individual identified under subparagraph (A), that were serving as executive officers of an issuer at the end of the most recent fiscal year; or (ii)more than $500,000,000, the 4 most highly compensated executive officers, other than an individual identified under subparagraph (A), that were serving as executive officers of an issuer at the end of the most recent fiscal year.. (b)

Deadline for rulemaking

Not later than 1 year after the date of the enactment of this Act, the Securities and Exchange Commission shall issue any final rules and regulations required by the amendments made by subsection (a).

3.

Clear and simple Internet disclosure

Section 16(a)(4) of the Securities Exchange Act of 1934 (15 U.S.C. 78p(a)(4)) is amended— (1)in subparagraph (B), by inserting , in a clear, simple, and readily accessible format, after each such statement; and (2)in subparagraph (C), by inserting , in a clear, simple, and readily accessible format, after that statement.