Alert January 19, 2010

SEC Approves Proxy Rule Changes to Require Shareholder Advisory Vote on Executive Compensation of TARP Recipients

The SEC issued the adopting release for changes to the proxy rules that require a company that has received financial assistance under the Troubled Asset Relief Program (“TARP”) to include a separate shareholder vote to approve the compensation of the company’s executives disclosed in the company’s proxy materials.  The rules apply to proxy materials for an annual (or special meeting in lieu of an annual) meeting for which proxies are solicited regarding an election of directors.  The SEC adopted the new requirement pursuant to Section 111(e) of the Emergency Economic Stabilization Act of 2008, as amended by Section 7001 of the American Recovery and Reinvestment Act of 2009.  This requirement, which becomes effective February 18, 2010, will apply to a company for as long as its obligation for TARP assistance remains outstanding.  The required shareholder vote (a) is not binding on the board of directors of a TARP recipient, (b) will not be construed as overruling a board decision or as creating or implying any additional fiduciary duty by a TARP recipient’s board and (c) will not be construed to restrict or limit the ability of shareholders to submit proposals related to executive compensation for inclusion in proxy materials.  A TARP recipient will not have to file a preliminary proxy statement solely because its proxy statement complies with the new shareholder advisory vote requirement.