Short title

This Act may be cited as the

Shareholder Empowerment Act of 2009

Majority voting for directors

The Securities Exchange Act of 1934 is amended by adding after section 16 the following new section:

16A.

Election of Directors

(a)

Standards relating to election of directors

(1)

Commission rules

Not later than 270 days after the date of enactment of this section, the Commission shall, by rule, direct the national securities exchanges and national securities associations to prohibit the listing of any security of an issuer that is not in compliance with the requirements of any portion of paragraph (2). Such rules shall provide for appropriate procedures for an issuer to have an opportunity to cure any defects that would be the basis for such a prohibition before the imposition of such prohibition. (2)

Standards for election of directors

(A)

Majority voting

Each issuer shall, to the extent permitted under State law, provide in its governing documents that— (i)directors in uncontested elections shall be elected by a majority of the votes cast as to each nominee; and (ii)in contested elections where the number of nominees exceeds the number of directors to be elected, directors shall be elected by the vote of a plurality of the shares represented at any meeting and entitled to vote on the election of directors. (B)

Resignation policy

Each issuer shall also, to the extent permitted under State law, adopt procedures under which any director who is not elected to a new term shall offer to tender his or her resignation to the board of directors. The board of directors, with the advice of a committee of the board if such a committee has been established for that purpose, shall determine what action should be taken as to that resignation and shall publicly disclose its decision and the rationale for that decision within a reasonable period after certification of the election results. (b)

Shareholder access to the proxy in director elections

(1)

Rule

Not later than 270 days after the date of enactment of this section, the Commission shall, by rule, require that in proxy statements and proxies, authorizations or consents prepared by an issuer pursuant to section 14, the issuer shall identify and provide security holders with an opportunity to vote on candidates for the board of directors who have been nominated by holders in the aggregate at least 1 percent of the issuer’s voting securities for at least 2 years prior to a record date established by the issuer for a meeting of security holders. (2)

Application

This rule shall specify the information to be provided to an issuer by security holders who nominate candidates for inclusion in an issuer’s proxy materials under this section and shall require the issuer to disclose information about such candidates in the issuer’s proxy materials to the same extent that information must be disclosed about candidates nominated by the issuer. This rule shall apply only when eligible security holders have nominated fewer than a majority of the number of directors then authorized to serve on the board of directors, and the rule shall specify procedures to be followed if different security holders nominate candidates sufficient to constitute a majority of the board of directors. (3)

Effective date

The rule shall apply to proxy voting for meetings of security holders held on or after January 1, 2010, except to the extent that a meeting was originally scheduled to be held in 2009, but was adjourned to 2010. (c)

Broker discretionary voting in uncontested director elections

Not later than 270 days after the date of enactment of this section, the Commission shall by, rule, require that a broker shall not be allowed to vote securities on an uncontested election to the board of directors of an issuer to the extent that the beneficial owner of those securities has not provided specific instructions to the broker. The rule shall apply to proxy voting for meetings of security holders held on or after January 1, 2010, except to the extent that a meeting was originally scheduled to be held in 2009, but was adjourned to 2010. (d)

Independent chairman of the board of directors

(1)

Commission Rules

Independent chairman of the board of directors

Each issuer shall provide in its governing documents or a public statement of corporate policy that, to the extent possible and consistent with the issuer’s status as a publicly traded company, the chairman of the board of directors shall be an independent director who has not previously served as an executive officer of the issuer. Such rule shall be implemented with due regard for contracts in existence on the date of enactment of this section. For purposes of this subsection, an independent director shall be one who during the preceding 5 years has not been— (A)employed by the issuer in an executive capacity; (B)an employee, director or owner greater than 20 percent of the beneficial shares of a firm that is a paid adviser or consultant to the issuer; (C)employed by a significant customer or supplier of the issuer; (D)a party to a personal services contract with the issuer, as well as with the issuer’s Chair, chief executive officer, or other senior executive officer; (E)an employee, officer or director of a foundation, university or other non-profit organization that receives the greater of $100,000 or 1 percent of total annual donations from the issuer; (F)a relative of an executive of the issuer; (G)part of an interlocking directorate in which the issuer’s chief executive officer or another executive serves on the board of another issuer employing that director; and (H)engaged in any other relationship with the issuer or senior executives that the Commission determines would not render that director an independent director.

Executive compensation requirements

The Securities Exchange Act of 1934 is further amended by adding after the section 16A, as added by section 2, the following new section

16B.

Executive compensation requirements

(a)

Shareholder approval of executive compensation

(1)

Annual shareholder vote on executive compensation

Any proxy or consent or authorization for an annual or other meeting of an issuer shall permit a separate vote by shareholders to approve the compensation of senior executive officers, as disclosed pursuant to the compensation disclosure rules of the Commission (which disclosure shall include the compensation discussion and analysis, the compensation tables, and any related material). (2)

Non-binding nature of vote

A shareholder vote described in paragraph (1) shall not be binding on the board of directors of an issuer and may 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 security holders to make proposals for inclusion in proxy materials related to executive compensation. (3)

Deadline for rules

Not later than 1 year after the date of enactment of this section, the Commission shall issue any final rules and regulations required by this section. (4)

Exception

This provision shall not apply to any issuer who is subject to a similar recoupment requirement under another provision of Federal law. (b)

Independent compensation advisers

(1)

Requirement

Not later than 1 year after the date of enactment of this section, the Commission shall, by rule, require that if an issuer’s board of directors or a committee thereof retains an individual adviser or advisory firm in conjunction with negotiating employment contracts or compensation agreements with the issuer’s executives, the individual adviser and his or her firm shall be independent of the issuer, its executives and directors, and shall report solely to the board of directors or the committee thereof responsible for executive compensation. The rule shall further require that issuers shall not agree to indemnify or limit the liability of compensation advisers or advisory firms. (2)

Determination

In determining the extent to which an adviser or advisory firm is independent of an issuer within the meaning of this section, the Commission shall consider such matters as— (A)the extent (as measured by annual fees and other relevant metrics) to which an individual adviser or advisory firm provides services in conjunction with negotiating employment contracts or compensation agreements with the issuer’s executives, as compared to other services that the adviser or advisory firm provides to the issuer or executives; (B)whether individual advisers are permitted to hold equity and do hold equity in the issuer; and (C)whether an advisory firm’s incentive compensation plan links the compensation of individual advisers to the advisory firm’s provision of other services to the issuer. (c)

Clawbacks of unearned performance-based pay

(1)

Commission rules

Recoupment of unearned compensation

An issuer’s board of directors or a committee thereof shall develop and disclose a policy for reviewing unearned bonus payments, incentive payments, or equity payments that were awarded to executive officers owing to fraud, financial results that require restatement, or some other cause. The policy should require recovery or cancellation of any unearned payments to the extent that it is feasible and practical to do so. (3)

Exception

This provision shall not apply to any issuer who is subject to a similar recoupment requirement under another provision of Federal law. (d)

Severance agreements tied to performance

(1)

Commission rules

Severance agreements tied to performance

An issuer’s board of directors or a committee thereof shall not enter into agreements providing for severance payments to a senior executive officer who is terminated because of poor performance as an executive, as determined by the board of directors. To the extent that an issuer is able to terminate a senior executive officer for cause, poor performance by the executive, as determined by the board of directors, shall be considered as one such cause. The rule shall be implemented with due regard for contracts in existence on the date of enactment of this section. (e)

Improved disclosure of compensation targets

Not later than 1 year after the date of enactment of this section, the Commission shall, by rule, require additional disclosure of specific performance targets that are used by issuers to determine a senior executive officer’s eligibility for bonuses, equity and incentive compensation. The Commission shall consider methods to improve disclosure in situations when it is claimed that disclosure would result in competitive harm to the issuer, including, requirements that the issuer describe its past experience with similar target levels, disclose any inconsistencies between compensation targets and targets set in other contexts, submit a request for confidential treatment of the performance targets under Commission rules, or disclose the data after disclosure would no longer be considered competitively harmful.