Executive compensation arrangements and corporate governance have come under very close public scrutiny around the world in the wake of the global financial crisis. In the US, this has culminated in the Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank"), which was signed into law by President Obama on 21 July 2010.
Dodd-Frank is primarily focussed on the regulation of banks and the financial services industry, but some of its provisions apply more generally to US listed companies. These provisions have introduced profound change to the corporate governance of US listed companies generally and the regulation of executive compensation in particular.
The corporate governance regime for listed companies in the US has historically been based upon a significant level of board control (subject to fiduciary duties to shareholders) and can best be described as "board-centric" in approach. The new corporate governance provisions brought in by Dodd-Frank, however, constitute a significant move towards a greater level of mandatory participatory 'corporate democracy,' and a more 'shareholder-centric' approach to corporate governance.
In this article we examine some of the most significant corporate governance changes brought about by Dodd-Frank and contrast them with the existing corporate governance regime for listed companies in the UK. We then assess the influence Dodd-Frank may have on any further changes to the UK corporate governance regime.
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