Monday, February 13, 2012

Corp Fin Issues C&DI on Advisory Vote Description

The SEC’s Division of Corporation Finance today issued a new C&DI providing guidance on how to describe the shareholder advisory vote on the proxy card and voting instruction form. Exchange Act Rule 14a-21 mandates that shareholders be given an advisory vote to approve compensation of named executive officers, as disclosed under Item 402 of Regulation S-K. According to C&DI 169.07 (added February 13, 2012), the following descriptions are acceptable:

1. To approve the company’s executive compensation
2. Advisory approval of the company’s executive compensation
3. Advisory resolution to approve executive compensation
4. Advisory vote to approve named executive officer compensation

However, the description “To hold an advisory vote on executive compensation” is unacceptable. This is so, reasoned the C&DI, because shareholders may be confused about whether they are voting in an advisory capacity to approve executive compensation or whether they are voting to hold an advisory vote.