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Companies Push for More Clarity on Compensation Adviser Proposal

Arielle Bikard | May 24, 2011

Companies are looking for more clarification on terms in the Security and Exchange Commission's proposal to make board members who serve on compensation committees more independent and to minimize conflicts of interest with compensation advisers.

The comment period on the proposal, which was released in March, ended last week. The SEC is leaving the details of the rule writing to U.S. stock exchanges, but many questions were left unanswered about what the rules might look like. For example, there are questions about whether compensation committees will have to hire separate legal advisers, as well as how “independent legal counsel” should be defined.  At the deadline, 46 comment letters were sent to the SEC.

The comment letters from the business community centered on how terms would be defined in the final rule. For example, a May 12 letter from Pfizer's vice president and corporate secretary asks for a definition of “advice” in terms of compensation consultants'...

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