[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[S. 2866 Introduced in Senate (IS)]







110th CONGRESS
  2d Session
                                S. 2866

To require greater disclosure of senior corporate officer compensation, 
to empower shareholders and investors to protect themselves from fraud, 
to limit conflicts of interest in determining senior corporate officer 
  compensation, to ensure integrity in Federal contracting, to close 
corporate tax loopholes utilized to subsidize senior corporate officer 
                 compensation, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             April 15, 2008

 Mr. Reid (for Mrs. Clinton) introduced the following bill; which was 
          read twice and referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
To require greater disclosure of senior corporate officer compensation, 
to empower shareholders and investors to protect themselves from fraud, 
to limit conflicts of interest in determining senior corporate officer 
  compensation, to ensure integrity in Federal contracting, to close 
corporate tax loopholes utilized to subsidize senior corporate officer 
                 compensation, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Corporate Executive Compensation 
Accountability and Transparency Act''.

SEC. 2. LIMITATION ON ANNUAL AMOUNTS WHICH MAY BE DEFERRED UNDER 
              NONQUALIFIED DEFERRED COMPENSATION ARRANGEMENTS.

    (a) In General.--Section 409A(a) of the Internal Revenue Code of 
1986 (relating to inclusion of gross income under nonqualified deferred 
compensation plans) is amended--
            (1) by striking ``and (4)'' in subclause (I) of paragraph 
        (1)(A)(i) and inserting ``(4), and (5)'', and
            (2) by adding at the end the following new paragraph:
            ``(5) Annual limitation on aggregate deferred amounts.--
                    ``(A) Limitation.--The requirements of this 
                paragraph are met if the plan provides that the 
                aggregate amount of compensation which is deferred for 
                any taxable year with respect to a participant under 
                the plan may not exceed the applicable dollar amount 
                for the taxable year.
                    ``(B) Inclusion of future earnings.--If an amount 
                is includible under paragraph (1) in the gross income 
                of a participant for any taxable year by reason of any 
                failure to meet the requirements of this paragraph, any 
                income (whether actual or notional) for any subsequent 
                taxable year shall be included in gross income under 
                paragraph (1)(A) in such subsequent taxable year to the 
                extent such income--
                            ``(i) is attributable to compensation (or 
                        income attributable to such compensation) 
                        required to be included in gross income by 
                        reason of such failure (including by reason of 
                        this subparagraph), and
                            ``(ii) is not subject to a substantial risk 
                        of forfeiture and has not been previously 
                        included in gross income.
                    ``(C) Aggregation rules.--For purposes of this 
                paragraph, all nonqualified deferred compensation plans 
                maintained by all employers treated as a single 
                employer under subsection (d)(6) shall be treated as 1 
                plan.
                    ``(D) Applicable dollar amount.--For purposes of 
                this paragraph, the term `applicable dollar amount' 
                means, with respect to any participant, $1,000,000.''.
    (b) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to taxable years beginning after December 31, 2008, 
        except that the amendments shall only apply to amounts deferred 
        after December 31, 2008 (and to earnings on such amounts).
            (2) Guidance relating to certain existing arrangements.--
        Not later than 60 days after the date of the enactment of this 
        Act, the Secretary of the Treasury shall issue guidance 
        providing a limited period during which a nonqualified deferred 
        compensation plan adopted before December 31, 2008, may, 
        without violating the requirements of section 409A(a) of such 
        Code, be amended--
                    (A) to provide that a participant may, no later 
                than December 31, 2008, cancel or modify an outstanding 
                deferral election with regard to all or a portion of 
                amounts deferred after December 31, 2008, to the extent 
                necessary for the plan to meet the requirements of 
                section 409A(a)(5) of such Code (as added by the 
                amendments made by this section), but only if amounts 
                subject to the cancellation or modification are, to the 
                extent not previously included in gross income, 
                includible in income of the participant when no longer 
                subject to substantial risk of forfeiture, and
                    (B) to conform to the requirements of section 
                409A(a)(5) of such Code (as added by the amendments 
                made by this section) with regard to amounts deferred 
                after December 31, 2008.

SEC. 3. EXECUTIVE REIMBURSEMENT OF COMPENSATION FOR MISCONDUCT.

    Section 304 of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7243) is 
amended--
            (1) in subsection (a), by striking ``12-month'' each place 
        that term appears and inserting ``36-month'';
            (2) by amending subsection (b) to read as follows:
    ``(b) Rulemaking To Improve Enforcement.--
            ``(1) In general.--Not later than 120 days after the date 
        of enactment of the Corporate Executive Compensation 
        Accountability and Transparency Act, the Commission shall 
        develop and issue regulations to ensure more effective 
        enforcement of subsection (a). In developing the regulations 
        required under this paragraph, the Commission shall provide a 
        comment period not to exceed 60 days.
            ``(2) Required inclusions.--The regulations required under 
        paragraph (1) shall, at a minimum, clarify--
                    ``(A) that the term `misconduct' includes 
                misconduct that results from--
                            ``(i) specific illicit actions of a senior 
                        executive or officer, including the chief 
                        executive officer and chief financial officer, 
                        of a company, or knowledge of illicit actions, 
                        accompanied by willful inaction to address such 
                        illicit actions; or
                            ``(ii) the willful concealment by such 
                        executive or officer, of illicit actions; and
                    ``(B) that the term `illicit action' includes any 
                of the following activities:
                            ``(i) Backdating stock options to conceal 
                        liabilities, losses, or any other negative 
                        financial information from shareholders and 
                        investors.
                            ``(ii) Accounting irregularities designed 
                        to conceal losses, liabilities, or other 
                        negative financial information from 
                        shareholders, boards of directors, or 
                        government regulators, that are required to be 
                        disclosed under this Act, or any other Act, 
                        regulation, or rule governing securities.
                            ``(iii) Accounting irregularities designed 
                        to artificially achieve profit or other 
                        financial targets that would not have 
                        reasonably been met under generally accepted 
                        accounting principles and industry standards, 
                        or through compliance with--
                                    ``(I) this Act, or any other Act, 
                                regulation, or rule governing 
                                securities; and
                                    ``(II) any provision of the 
                                Internal Revenue Code of 1986.
                            ``(iv) Willfully circumventing the 
                        reporting, independence, due diligence, 
                        disclosure or fiduciary requirements and 
                        obligations of this Act, or any other Act, 
                        regulation, or rule governing securities in 
                        order to mislead, deceive, or withhold 
                        information that is required to be given to 
                        shareholders, boards of directors, and Federal 
                        and State regulatory authorities.
                            ``(v) Any conduct that violates, or is in 
                        conflict with, the legal and fiduciary 
                        responsibilities of the senior executive or 
                        officer to the shareholders and boards of 
                        directors of such executive or officer.''; and
            (3) by adding at the end the following:
    ``(c) Report.--Not later than 60 days after the date of enactment 
of the Corporate Executive Compensation Accountability and Transparency 
Act, the Chair of the Commission shall issue a report--
            ``(1) analyzing the current enforcement efforts of the 
        Commission in regards to this section; and
            ``(2) listing the legislative, regulatory, or 
        administrative recommendations of the Commission on how to 
        remove any current barriers to effective enforcement of this 
        section.
    ``(d) Commission Exemption Authority.--
            ``(1) In general.--The Commission may exempt any person 
        from the application of subsection (a), as it deems necessary 
        and appropriate.
            ``(2) Notice.--If the Commission exempts any person 
        pursuant to its authority under paragraph (1), the Commission 
        shall, not later than 15 days after such exemption is granted, 
        issue a public statement explaining the factors surrounding the 
        granting of such exemption and shall notify the chairperson and 
        ranking minority member of the appropriate committees of 
        Congress.''.

SEC. 4. SHAREHOLDER VOTE ON EXECUTIVE COMPENSATION DISCLOSURES.

    (a) Amendment.--Section 14 of the Securities Exchange Act of 1934 
(15 U.S.C. 78n) is amended by adding at the end the following:
    ``(i) Annual Shareholder Approval of Executive Compensation.--
            ``(1) Annual vote.--Any proxy or consent or authorization 
        for an annual meeting of the shareholders (or a special meeting 
        in lieu of the annual meeting) occurring on or after January 1, 
        2009, shall provide for a separate shareholder vote to approve 
        the compensation of executives as disclosed pursuant to the 
        Commission's compensation disclosure rules (which disclosure 
        shall include the compensation discussion and analysis, the 
        compensation tables, and any related material). The shareholder 
        vote shall not be binding on the corporation or the board of 
        directors and shall not be construed as overruling a decision 
        by such board, nor to create or imply any additional fiduciary 
        duty by such board, nor shall such vote be construed to 
        restrict or limit the ability of shareholders to make proposals 
        for inclusion in such proxy materials related to executive 
        compensation.
            ``(2) Shareholder approval of golden parachute 
        compensation.--
                    ``(A) Disclosure.--In any proxy solicitation 
                material for an annual meeting of the shareholders (or 
                a special meeting in lieu of the annual meeting) 
                occurring on or after January 1, 2009, that concerns an 
                acquisition, merger, consolidation, or proposed sale or 
                other disposition of substantially all the assets of an 
                issuer, 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 that have not been subject to a 
                shareholder vote under paragraph (1).
                    ``(B) Shareholder approval.--The proxy solicitation 
                material containing the disclosure required by 
                subparagraph (A) shall provide for a separate 
                shareholder vote to approve such agreements or 
                understandings. A vote by the shareholders shall not be 
                binding on the corporation or the board of directors 
                and shall not be construed as overruling a decision by 
                such board, nor to create or imply any additional 
                fiduciary duty by such board, nor shall such vote be 
                construed to restrict or limit the ability of 
                shareholders to make proposals for inclusion in such 
                proxy materials related to executive compensation.''.
    (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).

SEC. 5. DISCLOSURE OF COMPENSATION CONSULTANT ACTIVITIES AND 
              INDEPENDENCE.

    (a) Rulemaking.--Not later than 120 days after the date of the 
enactment of this Act, the Securities and Exchange Commission shall 
issue regulations clarifying and strengthening disclosure requirements 
for the compensation of consultants or advisors to a compensation 
committee of any company.
    (b) Content.--The regulations required under subsection (a) shall--
            (1) prohibit any other work or service performed by a 
        compensation consultant on behalf of the company that presents 
        a conflict of interest or otherwise compromises the 
        independence of the consultant;
            (2) require the company to certify whether a compensation 
        consultant performed any work, research, or preparation, or 
        otherwise had reasonable involvement in a compensation 
        recommendation, is independent; and
            (3) clarify the standards used by the Securities and 
        Exchange Commission to determine the independence of 
        compensation consultants, provided that such standards include 
        the following limitations:
                    (A) A compensation consultant who at any time in 
                the previous 18 months prior to the compensation 
                recommendation of such consultant to a company had 
                noncompensation consulting related business, or 
                otherwise had a noncompensation consultation related 
                financial relationship with that company, shall not be 
                considered independent.
                    (B) A compensation consultant that has or 
                previously had any financial or professional 
                relationship with a company, the board of directors of 
                such company, or any senior executive officers of such 
                company, that would reasonably be construed as 
                presenting a conflict of interest in the compensation 
                consultation recommendation of that consultant shall 
                not be considered independent.
    (c) Definition of Company.--For purpose of this section, the term 
``company'' means a corporation, association, partnership, trust, 
limited liability company, limited liability partnership, or other 
legal entity.

SEC. 6. REQUIREMENT FOR CERTAIN FEDERAL CONTRACTORS TO DISCLOSE 
              EXECUTIVE COMPENSATION STRUCTURES.

    (a) Disclosure Requirement.--
            (1) Civilian contracts.--Title III of the Federal Property 
        and Administrative Services Act of 1949 (41 U.S.C. 251 et seq.) 
        is amended by adding at the end the following new section:

``SEC. 318. REQUIREMENT TO DISCLOSE EXECUTIVE COMPENSATION STRUCTURES.

    ``(a) Compensation Structure Disclosure.--A contract for the 
procurement of property or services entered into by an executive agency 
with a covered contractor shall require the contractor to disclose to 
the contracting official an accounting of the compensation structures 
for the following individuals:
            ``(1) The chief executive officer of the contractor.
            ``(2) The chief financial officer of the contractor.
            ``(3) The 5 most highly compensated executive officers of 
        the contractor.
            ``(4) Each member of the board of directors of the 
        contractor, as appropriate.
    ``(b) Compensation Discussion and Analysis.--Not later than 90 days 
after entering into a contract described under subsection (a), a 
covered contractor shall submit to the contracting official of the 
executive agency a compensation discussion and analysis that justifies 
the compensation structures for the individuals identified in such 
subsection, including a good faith analysis and comparison of 
prevailing standard industry and market compensation structures with 
the compensation structures for such individuals.
    ``(c) Annual Update.--The covered contractor shall submit to the 
contracting official of the executive agency an annual update of the 
information required under subsection (a) for the duration of the 
contract.
    ``(d) Alternative Disclosure Requirement for Certain Contractors.--
            ``(1) In general.--A covered contractor described in 
        paragraph (2) that is unable to provide the information 
        required under subsections (a) and (b) may instead provide to 
        the contracting official of the executive agency the following:
                    ``(A) A certification that the contractor received 
                less than 50 percent of its annual gross revenues from 
                Federal contracts during the immediately preceding 
                fiscal year.
                    ``(B) An accounting of the compensation structures 
                for the 3 most highly compensated executive officers of 
                the contractor.
            ``(2) Contractors eligible for alternative disclosure 
        requirements.--A covered contractor is eligible to provide 
        alternative disclosure under this subsection if it is not 
        publicly held and is a small business concern owned and 
        controlled by socially and economically disadvantaged 
        individuals, a small business concern owned and controlled by 
        veterans, a small business concern owned and controlled by 
        women, or a socially and economically disadvantaged small 
        business concern.
            ``(3) Definitions.--In this subsection--
                    ``(A) the term `publicly held' means a business 
                concern that is--
                            ``(i) an issuer of a class of securities 
                        registered or that is required to be registered 
                        pursuant to section 12 of the Securities 
                        Exchange Act of 1934 (15 U.S.C. 781) or that is 
                        required to file reports pursuant to section 
                        15(d) of that Act (15 U.S.C. 78o(d)); or
                            ``(ii) owned by an issuer of a class of 
                        securities registered or that is required to be 
                        registered pursuant to section 12 of the 
                        Securities Exchange Act of 1934 (15 U.S.C. 78l) 
                        or that is required to file reports pursuant to 
                        section 15(d) of that Act (15 U.S.C. 78o(d));
                    ``(B) the term `small business concern owned and 
                controlled by socially and economically disadvantaged 
                individuals' has the meaning given that term in section 
                8(d)(3)(C) of the Small Business Act (15 U.S.C. 
                637(d)(3)(C));
                    ``(C) the terms `small business concern owned and 
                controlled by veterans' and `small business concern 
                owned and controlled by women' have the meanings given 
                those terms in section 3 of the Small Business Act (15 
                U.S.C. 632); and
                    ``(D) the term `socially and economically 
                disadvantaged small business concern' has the meaning 
                given that term in section 8(a)(4) of the Small 
                Business Act (15 U.S.C. 637(a)(4)).
    ``(e) Use of Information in Future Contracting Decisions.--
Information on contractors collected under subsections (b) and (d) 
shall be used by executive agencies in justifying and determining the 
value of future contract awards.
    ``(f) Availability of Information.--Information collected under 
subsections (a) through (d) shall be made publicly available in 
searchable form through the Federal Procurement Data System described 
in section 6(d)(4)(A) of the Office of Federal Procurement Policy Act 
(41 U.S.C. 405(d)(4)(A)).
    ``(g) Covered Contractor Defined.--In this section, the term 
`covered contractor' means an individual or entity that received more 
than $5,000,000 in annual gross revenues from Federal contracts (or 
subcontracts at any tier) during the preceding fiscal year.''.
            (2) Defense contracts.--
                    (A) Disclosure requirement.--Chapter 137 of title 
                10, United States Code, is amended by adding at the end 
                the following new section:
``Sec. 2334. Requirement to disclose executive compensation structures
    ``(a) Compensation Structure Disclosure.--A contract for the 
procurement of property or services entered into by an agency with a 
covered contractor shall require the contractor to disclose to the 
contracting official an accounting of the compensation structures for 
the following individuals:
            ``(1) The chief executive officer of the contractor.
            ``(2) The chief financial officer of the contractor.
            ``(3) The 5 most highly compensated executive officers of 
        the contractor.
            ``(4) Each member of the board of directors of the 
        contractor, as appropriate.
    ``(b) Compensation Discussion and Analysis.--Not later than 90 days 
after entering into a contract described under subsection (a), a 
covered contractor shall submit to the contracting official of the 
agency a compensation discussion and analysis that justifies the 
compensation structures for the individuals identified in such 
subsection, including a good faith analysis and comparison of 
prevailing standard industry and market compensation structures with 
the compensation structures for such individuals.
    ``(c) Annual Update.--The covered contractor shall submit to the 
contracting official of the agency an annual update of the information 
required under subsection (a) for the duration of the contract.
    ``(d) Alternative Disclosure Requirement for Certain Contractors.--
            ``(1) In general.--A covered contractor described in 
        paragraph (2) that is unable to provide the information 
        required under subsections (a) and (b) may instead provide to 
        the contracting official of the agency the following:
                    ``(A) A certification that the contractor received 
                less than 50 percent of its annual gross revenues from 
                Federal contracts during the immediately preceding 
                fiscal year.
                    ``(B) An accounting of the compensation structures 
                for the 3 most highly compensated executive officers of 
                the contractor.
            ``(2) Contractors eligible for alternative disclosure 
        requirements.--A covered contractor is eligible to provide 
        alternative disclosure under this subsection if it is not 
        publicly held and is a small business concern owned and 
        controlled by socially and economically disadvantaged 
        individuals, a small business concern owned and controlled by 
        veterans, a small business concern owned and controlled by 
        women, or a socially and economically disadvantaged small 
        business concern.
            ``(3) Definitions.--In this subsection--
                    ``(A) the term `publicly held' means a business 
                concern that is--
                            ``(i) an issuer of a class of securities 
                        registered or that is required to be registered 
                        pursuant to section 12 of the Securities 
                        Exchange Act of 1934 (15 U.S.C. 781) or that is 
                        required to file reports pursuant to section 
                        15(d) of that Act (15 U.S.C. 78o(d)); or
                            ``(ii) owned by an issuer of a class of 
                        securities registered or that is required to be 
                        registered pursuant to section 12 of the 
                        Securities Exchange Act of 1934 (15 U.S.C. 78l) 
                        or that is required to file reports pursuant to 
                        section 15(d) of that Act (15 U.S.C. 78o(d));
                    ``(B) the term `small business concern owned and 
                controlled by socially and economically disadvantaged 
                individuals' has the meaning given that term in section 
                8(d)(3)(C) of the Small Business Act (15 U.S.C. 
                637(d)(3)(C));
                    ``(C) the terms `small business concern owned and 
                controlled by veterans' and `small business concern 
                owned and controlled by women' have the meanings given 
                those terms in section 3 of the Small Business Act (15 
                U.S.C. 632); and
                    ``(D) the term `socially and economically 
                disadvantaged small business concern' has the meaning 
                given that term in section 8(a)(4) of the Small 
                Business Act (15 U.S.C. 637(a)(4)).
    ``(e) Use of Information in Future Contracting Decisions.--
Information on contractors collected under subsections (b) and (d) 
shall be used by agencies in justifying and determining the value of 
future contract awards.
    ``(f) Availability of Information.--Information collected under 
subsections (a) through (d) shall be made publicly available in 
searchable form through the Federal Procurement Data System described 
in section 6(d)(4)(A) of the Office of Federal Procurement Policy Act 
(41 U.S.C. 405(d)(4)(A)).
    ``(g) Covered Contractor Defined.--In this section, the term 
`covered contractor' means an individual or entity that received more 
than $5,000,000 in annual gross revenues from Federal contracts (or 
subcontracts at any tier) during the preceding fiscal year.''.
                    (B) Clerical amendment.--The table of contents at 
                the beginning of such chapter is amended by adding at 
                the end the following new item:

``2334. Requirement to disclose executive compensation structures.''.
    (b) Amendment of Federal Acquisition Regulation.--Not later than 
120 days after the date of the enactment of this Act, the Federal 
Acquisition Regulatory Council shall amend the Federal Acquisition 
regulation issued pursuant to section 25 of the Office of Federal 
Procurement Policy Act (41 U.S.C. 421) to provide for the 
implementation of the requirements of section 318 of the Federal 
Property of Administrative Services Act of 1949, as added by subsection 
(a)(1) and section 2334 of title 10, United States Code, as added by 
subsection (a)(2).

SEC. 7. INCREASING TRANSPARENCY ON STOCK OPTIONS ACCOUNTING AND 
              ACCURATE VALUATION OF EXECUTIVE COMPENSATION.

    (a) In General.--Notwithstanding any other provision of law, not 
later than 90 days after the date of the enactment of this Act, the 
Securities and Exchange Commission, in a manner consistent with the 
goal of providing investors with a clearer and more complete picture of 
the compensation earned by the principal executive officer, principal 
financial officer, the highest paid executive officers, and the members 
of the board of director of a company, shall issue regulations that 
require each company subject to the jurisdiction of the Commission to 
disclose, in clear terms, the full grant date present value of equity 
instruments that are used as executive compensation awards in the 
Summary Compensation Table of each such company.
    (b) Definition of Company.--For purpose of this section, the term 
``company'' means a corporation, association, partnership, trust, 
limited liability company, limited liability partnership, or other 
legal entity.
    (c) Rule of Construction.--Nothing in this section shall be 
construed to enable the Securities and Exchange Commission to take 
action that would materially weaken any current reporting or disclosure 
requirements or to allow an alternative valuation not consistent with 
the standard of ``full grant date present value of equity instruments'' 
to meet the goals of subsection (a).
                                 <all>