[Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3269 Introduced in House (IH)]

111th CONGRESS
  1st Session
                                H. R. 3269

 To amend the Securities Exchange Act of 1934 to provide shareholders 
with an advisory vote on executive compensation and to prevent perverse 
  incentives in the compensation practices of financial institutions.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             July 21, 2009

 Mr. Frank of Massachusetts (for himself, Mr. Peters, Ms. Kilroy, Mr. 
 Watt, Mr. Capuano, Mr. Al Green of Texas, Mr. Sherman, Mr. Carson of 
 Indiana, Mr. Gutierrez, Mr. Ellison, and Mr. Hinojosa) introduced the 
   following bill; which was referred to the Committee on Financial 
                                Services

_______________________________________________________________________

                                 A BILL


 
 To amend the Securities Exchange Act of 1934 to provide shareholders 
with an advisory vote on executive compensation and to prevent perverse 
  incentives in the compensation practices of financial institutions.

    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 and Financial Institution 
Compensation Fairness Act of 2009''.

SEC. 2. SHAREHOLDER VOTE ON EXECUTIVE COMPENSATION DISCLOSURES.

    Section 14 of the Securities Exchange Act of 1934 (15 U.S.C. 78n) 
is amended by adding at the end the following new subsection:
    ``(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 the date 
        that is 6 months after the date on which final rules are issued 
        under paragraph (3), 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 committee 
        report, the compensation discussion and analysis, the 
        compensation tables, and any related materials). 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 or consent 
                solicitation material for an annual meeting of the 
                shareholders (or a special meeting in lieu of the 
                annual meeting) occurring on or after the date that is 
                6 months after the date on which final rules are issued 
                under paragraph (3), that concerns an acquisition, 
                merger, consolidation, or proposed sale or other 
                disposition of all or substantially all the assets of 
                an issuer, the person making such solicitation shall 
                disclose in the proxy or consent solicitation material, 
                in a clear and simple tabular form in accordance with 
                regulations to be promulgated by 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 is 
                based on or otherwise relates to the acquisition, 
                merger, consolidation, sale, or other disposition of 
                all or substantially all of the assets of the issuer 
                that have not been subject to a shareholder vote under 
                paragraph (1), and the aggregate total of all such 
                compensation that may (and the conditions upon which it 
                may) be paid or become payable to or on behalf of such 
                executive officer.
                    ``(B) Shareholder approval.--Any proxy or consent 
                or authorization relating to the proxy or consent 
                solicitation material containing the disclosure 
                required by subparagraph (A) shall provide for a 
                separate shareholder vote to approve such agreements or 
                understandings and compensation as disclosed. A vote by 
                the shareholders shall not be binding on the 
                corporation or the board of directors of the issuer or 
                the person making the solicitation 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.
            ``(3) Rulemaking.--Not later than 6 months after the date 
        of the enactment of the Corporate and Financial Institution 
        Compensation Fairness Act of 2009, the Commission shall issue 
        rules and regulations to implement this subsection.''.

SEC. 3. COMPENSATION COMMITTEE INDEPENDENCE.

    (a) Standards Relating to Compensation Committees.--The Securities 
Exchange Act of 1934 (15 U.S.C. 78f) is amended by inserting after 
section 10A the following new section:

``SEC. 10B. STANDARDS RELATING TO COMPENSATION COMMITTEES.

    ``(a) Commission Rules.--
            ``(1) In general.--Effective not later than 270 days after 
        the date of enactment of the Corporate and Financial 
        Institution Compensation Fairness Act of 2009, 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 subsections (b) through (f).
            ``(2) Opportunity to cure defects.--The rules of the 
        Commission under paragraph (1) shall provide for appropriate 
        procedures for an issuer to have an opportunity to cure any 
        defects that would be the basis for a prohibition under 
        paragraph (1) before the imposition of such prohibition.
            ``(3) Exemption authority.--The Commission may exempt 
        certain categories of issuers from the requirements of 
        subsections (b) through (f), where appropriate in view of the 
        purpose of this section. In determining appropriate exemptions, 
        the Commission shall take into account, among other 
        considerations, the potential impact on smaller reporting 
        issuers.
    ``(b) Independence of Compensation Committees.--
            ``(1) In general.--Each member of the compensation 
        committee of the board of directors of the issuer shall be a 
        member of the board of directors of the issuer, and shall 
        otherwise be independent.
            ``(2) Criteria.--In order to be considered to be 
        independent for purposes of this subsection, a member of a 
        compensation committee of an issuer may not, other than in his 
        or her capacity as a member of the compensation committee, the 
        board of directors, or any other board committee--
                    ``(A) accept any consulting, advisory, or other 
                compensatory fee from the issuer; or
                    ``(B) be an affiliated person of the issuer or any 
                subsidiary thereof.
                    ``(C) Exemptive authority.--The Commission may 
                exempt from the requirements of paragraph (2) a 
                particular relationship with respect to compensation 
                committee members, where appropriate in view of the 
                purpose of this section.
            ``(3) Definition.--As used in this section, the term 
        `compensation committee' means--
                    ``(A) a committee (or equivalent body) established 
                by and amongst the board of directors of an issuer for 
                the purpose of determining and approving the 
                compensation arrangements for the executive officers of 
                the issuer; and
                    ``(B) if no such committee exists with respect to 
                an issuer, the independent members of the entire board 
                of directors.
    ``(c) Independence Standards for Compensation Consultants and Other 
Committee Advisors.--Any compensation consultant, legal counsel, or 
other adviser to the compensation committee of any issuer shall meet 
standards for independence established by the Commission by regulation.
    ``(d) Compensation Committee Authority Relating to Compensation 
Consultants.--
            ``(1) In general.--The compensation committee of each 
        issuer, in its capacity as a committee of the board of 
        directors, shall have the authority, in its sole discretion, to 
        retain and obtain the advice of a compensation consultant 
        meeting the standards for independence promulgated pursuant to 
        subsection (c), and the compensation committee shall be 
        directly responsible for the appointment, compensation, and 
        oversight of the work of such independent compensation 
        consultant. This provision shall not be construed to require 
        the compensation committee to implement or act consistently 
        with the advice or recommendations of the compensation 
        consultant, and shall not otherwise affect the compensation 
        committee's ability or obligation to exercise its own judgment 
        in fulfillment of its duties.
            ``(2) Disclosure.--In any proxy or consent solicitation 
        material for an annual meeting of the shareholders (or a 
        special meeting in lieu of the annual meeting) occurring on or 
        after the date that is 1 year after the date of enactment of 
        the Corporate and Financial Institution Compensation Fairness 
        Act of 2009, each issuer shall disclose in the proxy or consent 
        material, in accordance with regulations to be promulgated by 
        the Commission--
                    ``(A) whether the compensation committee of the 
                issuer retained and obtained the advice of a 
                compensation consultant meeting the standards for 
                independence promulgated pursuant to subsection (c); 
                and
                    ``(B) if the compensation committee of the issuer 
                has not retained and obtained the advice of a 
                compensation consultant meeting the standards for 
                independence promulgated pursuant to subsection (c), an 
                explanation of the basis for the compensation 
                committee's determination that the retention of such an 
                independent consultant was not in the interests of 
                shareholders.
    ``(e) Authority To Engage Independent Counsel and Other Advisors.--
The compensation committee of each issuer, in its capacity as a 
committee of the board of directors, shall have the authority, in its 
sole discretion, to retain and obtain the advice of independent counsel 
and other advisers meeting the standards for independence promulgated 
pursuant to subsection (c), and the compensation committee shall be 
directly responsible for the appointment, compensation, and oversight 
of the work of such independent counsel and other advisers. This 
provision shall not be construed to require the compensation committee 
to implement or act consistently with the advice or recommendations of 
such independent counsel and other advisers, and shall not otherwise 
affect the compensation committee's ability or obligation to exercise 
its own judgment in fulfillment of its duties.
    ``(f) Funding.--Each issuer shall provide for appropriate funding, 
as determined by the compensation committee, in its capacity as a 
committee of the board of directors, for payment of compensation--
            ``(1) to any compensation consultant to the compensation 
        committee that meets the standards for independence promulgated 
        pursuant to subsection (c), and
            ``(2) to any independent counsel or other adviser to the 
        compensation committee.''.
    (b) Study and Review Required.--
            (1) In general.--The Securities and Exchange Commission 
        shall conduct a study and review of the use of compensation 
        consultants meeting the standards for independence promulgated 
        pursuant to section 10B(c) of the Securities Exchange Act of 
        1934 (as added by subsection (a)), and the effects of such use.
            (2) Report to congress.--Not later than 2 years after the 
        date of enactment of this Act, the Commission shall submit a 
        report to the Congress on the results of the study and review 
        required by this paragraph.

SEC. 4. ENHANCED COMPENSATION STRUCTURE REPORTING TO REDUCE PERVERSE 
              INCENTIVES.

    (a) Enhanced Disclosure and Reporting of Compensation 
Arrangements.--Not later than 270 days after the date of enactment of 
this Act, the appropriate Federal regulators jointly shall prescribe 
regulations to require each covered financial institution to disclose 
to the appropriate Federal regulator the structures of the incentive-
based compensation arrangements for officers and employees of such 
institution sufficient to determine whether the compensation 
structure--
            (1) is aligned with sound risk management;
            (2) is structured to account for the time horizon of risks; 
        and
            (3) meets such other criteria as the appropriate Federal 
        regulators jointly may determine to be appropriate to reduce 
        unreasonable incentives for officers and employees to take 
        undue risks that--
                    (A) could threaten the safety and soundness of 
                covered financial institutions; or
                    (B) could have serious adverse effects on economic 
                conditions or financial stability.
    (b) Prohibition on Certain Compensation Structures.--Not later than 
270 days after the date of enactment of this Act, and taking into 
account the factors described in paragraphs (1), (2), and (3) of 
subsection (a), the appropriate Federal regulators shall jointly 
prescribe regulations that prohibit any compensation structure or 
incentive-based payment arrangement, or any feature of any such 
compensation structure or arrangement, that the regulators determine 
encourages inappropriate risks by financial institutions or officers or 
employees of covered financial institutions that--
            (1) could threaten the safety and soundness of covered 
        financial institutions; or
            (2) could have serious adverse effects on economic 
        conditions or financial stability.
    (c) Enforcement.--The provisions of this section shall be enforced 
under section 505 of the Gramm-Leach-Bliley Act and, for purposes of 
such section, a violation of this section shall be treated as a 
violation of subtitle A of title V of such Act.
    (d) Definitions.--As used in this section--
            (1) the term ``appropriate Federal regulator'' means--
                    (A) the Board of Governors of the Federal Reserve 
                System;
                    (B) the Office of the Comptroller of the Currency;
                    (C) the Board of Directors of the Federal Deposit 
                Insurance Corporation;
                    (D) the Director of the Office of Thrift 
                Supervision;
                    (E) the National Credit Union Administration Board; 
                and
                    (F) the Securities and Exchange Commission; and
            (2) the term ``covered financial institution'' means--
                    (A) a depository institution or depository 
                institution holding company, as such terms are defined 
                in section 3 of the Federal Deposit Insurance Act (12 
                U.S.C. 1813);
                    (B) a broker-dealer registered under section 15 of 
                the Securities Exchange Act of 1934 (15 U.S.C. 78o);
                    (C) a credit union, as described in section 
                19(b)(1)(A)(iv) of the Federal Reserve Act;
                    (D) an investment advisor, as such term is defined 
                in section 202(a)(11) of the Investment Advisers Act of 
                1940 (15 U.S.C. 80b-2(a)(11)); and
                    (E) any other financial institution that the 
                appropriate Federal regulators, jointly, by rule, 
                determine should be treated as a covered financial 
                institution for purposes of this section.
                                 <all>