CHAPTER 7 Other Securities Issues

This chapter discusses certain specific securities issues that should be of particular interest to compensation committees of public companies, in addition to the disclosure issues discussed in Chapter 6. The first section contains a discussion of certain provisions of the Dodd-Frank Act relating to executive compensation and corporate governance, including Say on Pay and the new clawback policy requirement. The next section outlines special rules regarding stock transactions, including (1) the reporting system and short-swing profit liability provisions of Section 16 of the Securities Exchange Act of 1934 (Exchange Act), (2) the prohibition against trading on “inside information,” (3) the trading defenses available under 10b5-1 programs, (4) the prohibition against insider trades during pension fund blackout periods, and (5) sales of restricted and control stock under Rule 144 of the Securities Act of 1933 (Securities Act). The next section addresses New York Stock Exchange (NYSE) and the NASDAQ Stock Market (NASDAQ) rules regarding shareholder approval of equity compensation plans. The chapter concludes by highlighting the effect of certai other provisions of the Sarbanes-Oxley Act of 2002 on executive compensation, including the prohibition on loans to directors and executive officers (Section 402) and the requirement to disgorge profits from equity awards upon certain financial restatements (Section 304).

Selected Dodd-Frank Provisions ...

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