Whitehouse Amendment to Senate Reform Bill Would Mandate Independent Compensation Consultants
An amendment (SA 3773) to the Senate financial reform bill offered by Senator Sheldon Whitehouse would mandate that any compensation consultant, legal counsel, or other adviser to a company’s compensation committee must be independent. The SEC must adopt rules defining the term independent for these purposes. The Whitehouse Amendment would conform the Senate legislation to comparable provisions in the House financial reform legislation providing that compensation consultants, counsel and other advisers hired by the compensation committee must satisfy independence criteria established by the SEC.
Currently, the Senate bill does not mandate independent compensation consultants. Rather, S3217 provides that, in hiring a compensation consultant or legal counsel, a compensation committee will have to consider independence factors as outlined by the SEC. The bill requires the SEC to identify a number of factors affecting the independence of a compensation consultant, legal counsel, or other adviser to a compensation committee, including the provision of other services to the company by the person that employs the compensation consultant or counsel, the amount of fees received from the company by the person that employs the compensation consultant or counsel as a percentage of the total revenue of that person, and the policies of the person that employs the compensation consultant or counsel that are designed to prevent conflicts of interest. The SEC must also identify any business or personal relationship the consultant or adviser has with a member of the compensation committee, as well as any company stock the consultant or adviser may own.