(The following post originally appeared on ONSecurities, a top Minnesota legal blog founded by Martin Rosenbaum to address securities, governance and compensation issues facing public companies.)
The new version of the ON Securities Cheat Sheet gives more detail on the Dodd Bill, the Restoring American Financial Stability Act of 2010. The Dodd Bill includes more extensive governance and compensation reforms than the Frank Bill, also described in the Cheat Sheet. The differences will need to be worked out in conference committee.
One interesting feature of the Dodd Bill is a requirement for majority voting for directors in uncontested elections (Section 971 of the Dodd Bill, at page 1103). The requirement applies to companies listed on securities exchanges (including Nasdaq). If the director does not receive a majority of votes cast in the election, the director must tender his or her resignation. The Board can choose to accept the resignation or can reject it by a unanimous vote. Within 30 days after the vote, the Board must disclose the specific reasons that the Board did not accept the resignation, and that this decision was in the best interests of shareholders, along with a discussion of the analysis used in reaching the conclusion.
The majority voting provision is not included in the Frank Bill, so the conference committee must decide whether it will be included in the final bill. As reported in a Reuters article, “Wall Street Critic Frank to Shepherd Final Reform Bill”, the committee could have a final bill ready for signature by the President by July 4. In a post in the RiskMetrics Blog, “Majority Voting May Not Appear in Final Reform Bill”, Ted Allen reports that Representative Frank is “unsure” whether the majority voting provision will appear in the final bill. One way or another, by July 4 there could be "fireworks" on Capitol Hill for public companies.