We are discussing the list of anticipated rulemakings and "long term" projects recently submitted to OIRA by the Commission. One thing is for certain. In the area of rulemaking, 2014 will be a year devoted to compensation issues.
Dodd-Frank also remains at the forefront of the regulatory agenda, with particular emphasis on executive compensation. The Unified Agenda includes two compensation proposals, Compensation Clawback and Pay for Performance, and one final rule, pay ratio disclosure. In addition, the Commission lists as a "long term" project the completion of "Rules Regarding Incentive Compensation," the provision in Dodd-Frank that gave rulemaking authority to financial regulators with respect to large financial institution's incentive-based compensation practices.
Compensation clawbacks has been on the Unified Agenda since the Spring of 2011. Another Dodd-Frank provision, the Commission is required to adopt listing standards that mandate the adoption of policies by companies that require clawbacks of incentive based compensation paid to executive officers following an "accounting restatement due to the material noncompliance of the issuer . . . ." See Section 954 of Dodd-Frank. The provision has not been free from controversy within the Commission. Similarly, Pay for Performance (disclosure required by Section 953(b) of Dodd-Frank) has been on the Unified Agenda since the Spring of 2011.
Given the pruning that took place between the Spring 2013 version of the Unified Agenda and the current version, the fact that these two provisions survived suggests that rule proposals will emerge during the next 12 months. Both will likely generate substantial controversy.
As for pay ratio disclosure, the Commission proposed a rule in 2013. Proposing and adopting are, of course, two different things. The Unified Agenda suggests that the Commission will move to a final rule during the next 12 months (the Unified Agenda lists October 2014). This also reflects a highly debated and controversial rule.
To the extent these projects move forward as suggested by the Unified Agenda, 2014 will be a year dominated by debates over executive compensation. With the advent of "say on pay," the issue is already very much on the front burner in the governance area. These rules will heighten the discussion.