Executive Compensation Regulation - Incentive-Based Compensation Arrangements

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Dodd-Frank Timeline, Incentive-Based Compensation Arrangements, SEC
Proposal Date Comment Deadline Final Rule Issue
April 14, 2011 May 31, 2011 TBA

Proposed Rules

  • Incentive-based compensation annual reports would be required of qualifying institutions.
  • Excessive compensation encouraging inappropriate risk-taking on the part of executives and/or resulting in losses by the institution would be prohibited.
  • An additional threshold of $50 billion for certain institutions would be added, and requirements such as the "deferral of incentive-based compensation of executive officers and approval of compensation for people whose job functions give them the ability to expose the firm to a substantial amount of risk" would be enforced.
  • Compliance policies and procedures regarding incentive-based compensation would be created and enforced.

Annual reports would include the following information:

  1. "A narrative description of the components of the firm’s incentive-based compensation arrangements;
  2. A succinct description of the firm’s policies and procedures governing its incentive-based compensation arrangements; and
  3. A statement of the specific reasons as to why the firm believes the structure of its incentive-based compensation arrangement will help prevent it from suffering a material financial loss or does not provide covered persons with excessive compensation."

The proposed rule, as it appeared in the Federal Register on April 14, 2011, can be found below.