result of fees for additional services, which is the primary concern
addressed by the final rule.
---------------------------------------------------------------------------

    \159\ See letters from Hewitt, Mercer, Pearl Meyer, and Towers
Perrin.
---------------------------------------------------------------------------

    We also considered the suggestion provided by these commenters that
companies be required to disclose various matters about the
consideration of potential conflicts of interest.\160\ We are not
persuaded that we need to address this issue at this time and believe
our final rule addresses our concerns without adding significant length
to the disclosure or burdens on companies.
---------------------------------------------------------------------------

    \160\ In their comment letters, several multi-service
compensation consulting firms proposed an alternative disclosure
requirement. Under their proposal, if the total fees paid to the
consultant for all services provided to the company and its
affiliates during the preceding fiscal year exceeded one-half of one
percent of the total revenues of the consultant for that fiscal
year, the company would be required to disclose, among other things,
the protocols established by the compensation committee to ensure
that the consultant is able to provide unbiased advice and is not
inappropriately influenced by the company's management. See letters
from Hewitt, Mercer, Watson Wyatt, and Towers Perrin.
---------------------------------------------------------------------------

    Our amendments as adopted are intended to facilitate investors'
consideration of whether, in providing advice, a compensation
consultant may have been influenced by a desire to retain other
engagements from the company. This does not reflect a conclusion that
we believe that a conflict of interest is present when disclosure is
required under our new rule, or that a compensation committee or a
company could not reasonably conclude that it is appropriate to engage
a consultant that provides other services to the company requiring
disclosure under our new rule. It also does not mean that we have
concluded that there are no other circumstances that might present a
conflict of interest for a compensation consultant retained by a
compensation committee or company. Rather, the amendments are designed
to provide context to investors in considering the compensation
disclosures required to be provided under our rules, and, as explained
above, are based on our understanding of the situations that are more
likely to raise potential conflicts of interest concerns.

E. Reporting of Voting Results on Form 8-K

    We proposed to transfer the requirement to disclose shareholder
vote results from Forms 10-Q and 10-K to Form 8-K, and to have that
information filed within four business days after the end of the
meeting at which the vote was held. We are adopting the proposal with
some modifications in response to comments.
1. Proposed Amendments
    Currently, Item 4 in Part II of Form 10-Q and Item 4 in Form 10-K
require the disclosure of the results of any matter that was submitted
to a vote of shareholders during the fiscal quarter covered by either
the Form 10-Q or Form 10-K with respect to the fourth fiscal quarter.
The proposed amendments would delete this requirement from Forms 10-Q
and 10-K and move it to Form 8-K. As a result, voting results would be
required to be filed on Form 8-K within four business days after the
end of the meeting at which the vote was held. To accommodate timing
difficulties in contested elections, we proposed a new instruction to
the form that stated that if the matter voted upon at the shareholders'
meeting related to a contested election of directors and the voting
results were not definitively determined at the end of the meeting,
companies would be required to file the preliminary voting results
within four business days after the preliminary voting results were
determined, and then file an amended report on Form 8-K within four
business days after the final voting results were certified.
2. Comments on the Proposed Amendments
    The majority of comments we received on the proposed amendments
supported requiring the filing of voting results on Form 8-K. Many
commenters believed that more timely disclosure of the voting result
would benefit shareholders and investors.\161\ Some noted that matters
submitted for shareholder vote involve issues that directly impact
shareholder interests--for example investment or divestments, changes
in shareholder rights and capital changes--and that timely disclosure
of voting results can be crucial.\162\ One commenter believed that
majority vote requirements for director elections have introduced
greater accountability and uncertainty into uncontested director
elections, making it increasingly important that these election
outcomes be reported in a timely manner to shareholders.\163\
---------------------------------------------------------------------------

    \161\ See, e.g., letters from CalSTRS, CII, Hermes, IIA, Norges
Bank, United Brotherhood of Carpenters and Walden.
    \162\ See, e.g., letters from CalSTRS and Norges Bank.
    \163\ See letter from United Brotherhood of Carpenters.
---------------------------------------------------------------------------

    Several commenters recommended modifications to the proposed
amendments. Specifically, some commenters expressed concern that
preliminary voting results should not be required to be disclosed
because disclosure of preliminary results could mislead investors if
the definitive results reflect a different outcome than what was
disclosed initially.\164\ Concerns were also expressed that the
reporting of preliminary voting results could inadvertently influence
voting if the disclosure is made at a time when the opportunity remains
open for additional votes to be cast.\165\ Commenters also believed
that the four business day reporting requirement should not be tied to
the end of the shareholders' meeting, but rather to the issuance of a
certified report of an inspector of election.\166\ In addition,
commenters suggested that the proposed instruction excepting the filing
of voting results in contested elections of directors within four
business days after the end of the shareholders' meeting should be
expanded to cover any matter for which final voting results are not
available or ``too close to call'' within four business days following
the end of the shareholders' meeting.\167\
---------------------------------------------------------------------------

    \164\ See e.g., letter from Chadbourne.
    \165\ See letter from ABA.
    \166\ See letter from Allen Goolsby, et al.
    \167\ See, e.g., letters from BorgWarner, Business Roundtable,
SCSG, S&C and Southern.
---------------------------------------------------------------------------

    A few commenters opposed the proposed amendments.\168\ Commenters
opposed to amendments expressed concern that it would be very difficult
to meet the four business day filing requirement. One of these
commenters noted that problems that stem from share lending and other
practices can

significantly delay the time that votes can be tabulated.\169\
---------------------------------------------------------------------------

    \168\ See, e.g., letters from Keith Bishop, NACD, RILA and SCC.
    \169\ See letter from NACD.
---------------------------------------------------------------------------

    Several commenters believed that the disclosure of the results of
shareholder votes should be added to the list of items on Form 8-K that
are currently excluded from liability under Section 10(b) of the
Exchange Act and Exchange Act Rule 10b-5, and that do not result in a
loss of Form S-3 eligibility under General Instruction I.A.3(b).\170\
One commenter, however, believed that an amendment to General
Instruction I.A.3(b) of Form S-3 to add an exception to the Form S-3
eligibility requirements for the reporting of voting results would not
be necessary if we allowed preliminary voting results for contested
elections and on proposals that are ``too close to call'' to be
reported within four business days of the meeting and final voting
results within four business days after the voting results become
final.\171\
---------------------------------------------------------------------------

    \170\ See letters from ABA, Business Roundtable, Honeywell and
S&C.
    \171\ See letter from SCSGP.
---------------------------------------------------------------------------

3. Final Rule
    After evaluating the comments received, we are adopting the
proposed amendments to Form 8-K, and are eliminating the requirement to
disclose shareholder voting results on Forms 10-Q and 10-K.
Accordingly, new Item 5.07 to Form 8-K requires companies to disclose
on the form the results of a shareholder vote and to have that
information filed within four business days after the end of the
meeting at which the vote was held. Tying the filing requirement to the
end of the meeting will provide shareholders, investors and other users
of this information with a readily identifiable and certain date upon
which a company would be required to disclose information on the
results of the vote. We believe more timely disclosure of the voting
results from an annual or special meeting would benefit investors and
the markets. Under our prior disclosure requirements, it could be a few
months before voting results are disclosed in a Form 10-Q or 10-K.
Often, matters submitted for a shareholder vote at an annual or special
meeting involve issues that directly impact shareholder interests, such
as the election of directors, changes in shareholder rights,
investments or divestments, and capital changes. The delay between the
end of an annual or special meeting of shareholders and when the voting
results of the meeting are disclosed in a Form 10-Q or 10-K can make
the information less useful to investors and the markets. We also
understand that technological advances in shareholder communications
and the growing use of third-party proxy services have increased the
ability of companies to tabulate vote results and disseminate this
information on a more expedited basis.
    We agree with the suggestions of commenters that there may be
situations other than contested elections where it may take a longer
period of time to determine definitive voting results.\172\ As a
result, we are expanding the instruction to Form 8-K as adopted to
state that companies are required to file the preliminary voting
results within four business days after the end of the shareholders'
meeting, and then file an amended report on Form 8-K within four
business days after the final voting results are known.\173\ However,
if a company obtains the definitive voting results before the
preliminary voting results must be reported and decides to report its
definitive results on Form 8-K, it will not be required to file the
preliminary voting results. For example, if a company obtains the
definitive voting results two days after the end of the shareholders'
meeting, it could report its definitive voting results on Form 8-K
within four business days after the meeting and would not be required
to file its preliminary voting results. To the extent that companies
are concerned that the disclosure of preliminary voting results could
be confusing to investors, they may include additional disclosure that
helps to put the preliminary voting disclosure in a proper context.
---------------------------------------------------------------------------

    \172\ See, e.g., letters from Business Roundtable, S&C and
Southern.
    \173\ See Instruction 1 to Item 5.07 of Form 8-K. We note that
our amendments to Form 8-K are not intended to preclude a company
from announcing preliminary voting results during the meeting of
shareholders at which the vote was taken and before filing the Form
8-K, without regard to whether the company webcast the meeting.
---------------------------------------------------------------------------

    In the Proposing Release, we requested comment on whether we should
consider additional revisions to the requirement to report voting
results, such as eliminating a portion of prior Instruction 4 to the
disclosure item. One commenter responded by suggesting that we could
consolidate and simplify some of the disclosure requirements and
instructions to the item.\174\ We agree with the suggestions that were
submitted, and believe that certain requirements and instructions to
the Item can be simplified, without changing the substance of what is
required to be reported. Accordingly, we are adopting the following
revisions to new Item 5.07:
---------------------------------------------------------------------------

    \174\ See letter of ABA.
---------------------------------------------------------------------------

     Adding to paragraph (a) of the item a statement that the
information required by the item need be provided only when a meeting
of shareholders is involved; \175\
---------------------------------------------------------------------------

    \175\ But see current Instruction 1 to Item 4 of Form 10-Q with
respect to matters that have been submitted to a vote otherwise than
at a meeting of shareholders, which we are not amending and which
will be retained as Instruction 2 to new Item 5.07 of Form 8-K.
---------------------------------------------------------------------------

     Combining paragraphs (b) and (c) to the item into a single
paragraph that requires disclosure of the quantitative results of each
matter voted on at the meeting, and a brief description of each matter;
and
     Eliminating Instruction 3, Instruction 5 and Instruction 7
to the item, as well as deleting the first sentence of Instruction 4.

III. Paperwork Reduction Act

A. Background

    Certain provisions of the final amendments contain ``collection of
information'' requirements within the meaning of the Paperwork
Reduction Act of 1995 (``PRA'').\176\ We published a notice requesting
comment on the collection of information requirements in the proposing
release for the rule amendments, and we submitted these requirements to
the Office of Management and Budget (``OMB'') for review in accordance
with the PRA.\177\ The titles for the collection of information are:
---------------------------------------------------------------------------

    \176\ 44 U.S.C. 3501 et seq.
    \177\ 44 U.S.C. 3507(d) and 5 CFR 1320.11.
---------------------------------------------------------------------------

    (1) ``Regulation 14A and Schedule 14A'' (OMB Control No. 3235-
0059);
    (2) ``Regulation 14C and Schedule 14C'' (OMB Control No. 3235-
0057);
    (3) ``Form 10-K'' (OMB Control No. 3235-0063);
    (4) ``Form 10-Q'' (OMB Control No. 3235-0070);
    (5) ``Form 10'' (OMB Control No. 3235-0064);
    (6) ``Form S-1'' (OMB Control No. 3235-0065);
    (7) ``Form S-4'' (OMB Control No. 3235-0324);
    (8) ``Form S-11'' (OMB Control No. 3235-0067);
    (9) ``Form 8-K'' (OMB Control No. 3235-0060);
    (10) ``Rule 20a-1 under the Investment Company Act of 1940,
Solicitations of Proxies, Consents, and Authorizations'' (OMB Control
No. 3235-0158);
    (11) ``Form N-1A'' (OMB Control No. 3235-0307);
    (12) ``Form N-2'' (OMB Control No. 3235-0026);

    (13) ``Form N-3'' (OMB Control No. 3235-0316); and
    (14) ``Regulation S-K'' (OMB Control No. 3235-0071).
    The regulations, schedules and forms were adopted under the
Securities Act and the Exchange Act, except for Forms N-1A, N-2, and N-
3, which we adopted pursuant to the Securities Act and the Investment
Company Act, and Rule 20a-1, which we adopted pursuant to the
Investment Company Act. The regulations, forms and schedules set forth
the disclosure requirements for periodic reports, registration
statements, and proxy and information statements filed by companies to
help investors make informed investment and voting decisions. The hours
and costs associated with preparing, filing and sending the form or
schedule constitute reporting and cost burdens imposed by each
collection of information. An agency may not conduct or sponsor, and a
person is not required to respond to, a collection of information
unless it displays a currently valid OMB control number. Compliance
with the amendments is mandatory. Responses to the information
collections will not be kept confidential and there is no mandatory
retention period for the information disclosed.

B. Summary of the Final Rules

    As discussed in more detail above, the amendments that we are
adopting will require:
     To the extent that risks arising from a company's
compensation policies and practices for employees are reasonably likely
to have a material adverse effect on the company, discussion of the
company's compensation policies or practices as they relate to risk
management and risk-taking incentives that can affect the company's
risk and management of that risk;
     Reporting of the aggregate grant date fair value of stock
awards and option awards granted in the fiscal year in the Summary
Compensation Table and Director Compensation Table, computed in
accordance with FASB ASC Topic 718, rather than the dollar amount
recognized for financial statement purposes for the fiscal year, with a
special instruction for awards subject to performance conditions;
     New disclosure of the qualifications of directors and
nominees for director, and the reasons why that person should serve as
a director of the company at the time at which the relevant filing is
made with the Commission;
     Additional disclosure of any directorships held by each
director and nominee at any time during the past five years at any
public company or registered management investment company;
     Additional disclosure of other legal actions involving a
company's executive officers, directors, and nominees for director, and
lengthening the time during which such disclosure is required from five
to ten years;
     New disclosure regarding the consideration of diversity in
the process by which candidates for director are considered for
nomination by a company's nominating committee;
     New disclosure about a company's board leadership
structure and the board's role in the oversight of risk;
     New disclosure about the fees paid to compensation
consultants and their affiliates under certain circumstances; and
     Disclosure of the vote results from a meeting of
shareholders on Form 8-K generally within four business days of the
meeting.
    The disclosure enhancements we are adopting will significantly
improve the information companies provide to investors with regard to
risk, governance and director qualifications and compensation. We
believe that providing a more transparent view of these matters will
help investors make more informed voting and investment decisions.

C. Summary of Comment Letters and Revisions to Proposals

    In the Proposing Release, we requested comment on the PRA analysis.
We received a response from one commenter that addressed our overall
burden estimates for the proposed amendments. This commenter asserted
that our PRA estimates underestimated the time and costs that companies
would need to expend in complying with the proposed amendments.\178\
This commenter asserted that companies would need to expend many
additional hours to update their director and officer questionnaires to
obtain more detailed information; director nominees would need to spend
additional time responding to these questionnaires and providing
companies with information about their backgrounds and qualifications;
and companies would need to spend time analyzing the responses,
deciding what information to disclose, and preparing the disclosures.
This commenter, however, did not provide alternative cost estimates or
cost estimates that could be applied generally to all companies. In
response to comments and modifications to the amendments as proposed,
we have revised our estimates as discussed more fully in Section D.
---------------------------------------------------------------------------

    \178\ See letter from Business Roundtable.
---------------------------------------------------------------------------

    We have made several substantive modifications to the proposed
amendments. First, new Item 402(s) of Regulation S-K requires a company
to discuss its compensation policies and practices for employees if
such policies and practices are reasonably likely to have a material
adverse effect on the company. This change from the ``may have a
material effect'' disclosure standard that was proposed should
substantially mitigate some of the costs and burdens associated with
the proposed amendments. By focusing on risks that are ``reasonably
likely to have a material adverse effect'' on the company, the
amendments are designed to elicit disclosure on the company's
compensation policies and practices that would be most relevant to
investors. Second, we have adopted amendments to expand the list of
legal proceedings involving directors, executive officers, and nominees
covered under Item 401(f) of Regulation S-K. Third, disclosure will be
required of whether (and if so, how) the nominating committee considers
diversity in identifying nominees for director. Fourth, we have adopted
a disclosure threshold under the compensation consultant disclosure
amendments that excludes fee and related disclosure where the fees for
non-executive compensation consulting services do not exceed $120,000
for a company's fiscal year. In addition, disclosure of fees for
consultants engaged by management would not be required if the
compensation committee or board has its own compensation consultant.

D. Revisions to PRA Reporting and Cost Burden Estimates

    For purposes of the PRA, in the Proposing Release we estimated that
the total annual increase in the paperwork burden for all companies
(other than registered management investment companies) to prepare the
disclosure that would be required under the proposed amendments would
be approximately 247,773 hours of company personnel time and a cost of
approximately $47,413,161 for the services of outside professionals. We
further estimated the total annual increase in paperwork burden for
registered management investment companies under the proposed
amendments to be approximately 14,041 hours of company personnel time
and a cost of approximately $7,048,900 for the services of outside
professionals. As discussed above, we are revising the PRA burden and
cost estimates that we

originally submitted to the OMB in connection with the proposed
amendments.
    We derived our new burden hour and cost estimates by estimating the
total amount of time it would take a company to prepare and review the
disclosure requirements contained in the final rules. This estimate
represents the average burden for all companies, both large and small.
Our estimates have been adjusted to reflect the fact that some of the
amendments would be required in some but not all of the documents
listed above in Section A, and would not apply to all companies. In
deriving our estimates, we recognize that the burdens will likely vary
among individual companies based on a number of factors, including the
size and complexity of their organizations, and the nature of their
operations. We believe that some companies will experience costs in
excess of this average in the first year of compliance with the
amendments and some companies may experience less than the average
costs. We estimate the annual incremental paperwork burden for all
companies (other than registered management investment companies) to be
approximately 223,426 hours of company personnel time and a cost of
approximately $49,964,730 for the services of outside professionals.
For registered management investment companies, we estimate the annual
paperwork burden to be approximately 19,334 hours of company personnel
time and a cost of approximately $9,480,200 for the services of outside
professionals. These estimates include the time and the cost of
preparing and reviewing disclosure, filing documents and retaining
records.
    With respect to reporting companies (other than registered
management investment companies), the new rules and amendments will
increase the existing disclosure burdens associated with proxy and
information statements, Forms 10, 10-K, 8-K, S-1, S-4 and S-11.
However, the disclosure requirements under new Item 402(s) of
Regulation S-K are not applicable to smaller reporting companies.\179\
With respect to registered management investment companies, the
revisions will be reflected in certain Regulation S-K items, Schedule
14A, and Forms N-1A, N-2 and N-3.
---------------------------------------------------------------------------

    \179\ Based on the number of proxy filings we received in the
2008 fiscal year, we estimate that approximately 3,922 domestic
companies are smaller reporting companies that have a public float
of less than $75 million.
---------------------------------------------------------------------------

    In the Proposing Release, we assumed that the burden hours of the
amendments would be comparable to the burden hours related to similar
disclosure requirements under existing reporting requirements, such as
the disclosure of audit fees and non-audit services,\180\ CD&A and
executive compensation reporting,\181\ and the disclosure of the
activities of nominating committees.\182\ We have made several
adjustments to these estimates to reflect the revisions we made to the
amendments and the responses of commenters. We increased the burden
estimate for the enhanced director and nominee disclosure by four hours
to reflect the additional disclosures that will be required, such as
the new legal proceedings and diversity policy, and to address concerns
that our initial estimate may have been understated. At the same time,
we have decreased the burden estimate related to new Item 402(s) of
Regulation S-K from sixteen to eight hours, as well as the burden
estimate related to the new compensation consultant disclosure from
four to three hours to reflect the revisions to the proposed
amendments. However, we made no change in our assumption that
substantially all of the burdens associated with the amendments to
Items 401 and 402 of Regulation S-K would be associated with Schedules
14A and 14C, as these would be the primary disclosure documents where
the new disclosures would be prepared and presented.\183\
---------------------------------------------------------------------------

    \180\ Release No. 33-8183 (Jan. 28, 2003) [68 FR 6006] (which we
estimated to be two hours).
    \181\ Release No. 33-8732A (Aug. 29, 2006) [71 FR 53518] (which
we estimated to be 95 hours).
    \182\ Release No. 33-8340 (Nov. 24, 2003) [68 FR 69204] (which
we estimated to be three hours).
    \183\ The burden estimates for Form 10-K assume that the
amendments to Items 401 and 402 of Regulation S-K would be satisfied
by either including the information directly in an annual report or
incorporating the information by reference from the proxy statement
or information statement on Schedule 14A or Schedule 14C. Our PRA
estimates include an estimated 1 hour burden in the Form 10-K and
schedules to account for the incorporation of the information that
would be required under proposed amendments to Items 401 and 402 of
Regulation S-K.
---------------------------------------------------------------------------

    We made no change in our estimate that there would be no annual
incremental increase in the paperwork burden for companies to comply
with the amendments to the Summary Compensation Table, Director
Compensation Table, and Grants of Plan-Based Awards Table. We believe
that the amendments to the Summary Compensation Table, Grants of Plan-
Based Awards Table and Director Compensation Table will simplify
executive compensation disclosure because companies no longer will need
to report two separate measures of equity compensation in their
compensation disclosure. For purposes of Item 402 disclosure, companies
no longer will need to explain or analyze a second, separate measure of
equity compensation that is based on financial statement recognition
rather than compensation decisions. In addition, we believe it is
likely that these amendments will make companies' identification of
named executive officers more consistent from year-to-year, providing
investors more meaningful disclosure and reducing executive
compensation tracking burdens in determining which executive officers
are the most highly compensated.
    We have added a special instruction for equity awards subject to
performance conditions calling for tabular disclosure of the value
computed based upon the probable outcome of the performance conditions
as of the grant date. Because this value is already required to be
computed under the accounting literature,\184\ it will not impose an
incremental increase in paperwork burden. This instruction also
requires footnote disclosure of the maximum value assuming the highest
level of performance conditions is probable. We believe that any
incremental burden associated with providing this footnote disclosure
would be minimal.
---------------------------------------------------------------------------

    \184\ FASB ASC Topic 718.
---------------------------------------------------------------------------

    For each reporting company (other than registered management
investment companies), we estimate that the amendments would impose on
average the following incremental burden hours:
     Eight hours related to the amendments to discuss
compensation policies and practices as they relate to risk management;
     Eight hours for the enhanced director and nominee
disclosure;
     Six hours for the disclosures about board leadership
structure and the board's role in risk oversight;
     Three hours for the disclosures regarding compensation
consultants; and
     One hour for the reporting of voting results on Form 8-K
rather than on Forms 10-Q and 10-K.
    With respect to registered management investment companies, the
amendments to Forms N-1A, N-2, and N-3 will increase existing
disclosure burdens for such forms by requiring:
     New disclosure of the qualifications of directors and
nominees for director, and the reasons why that person should serve as
a director of the company at the time at which the relevant filing is
made with the Commission;

     Additional disclosure of any directorships held by each
director and nominee at any time during the past five years at public
companies or registered management investment companies; and
     New disclosure about a fund's board leadership structure
and the board's role in the oversight of risk.
    We estimate that the amendments would impose on average the
following incremental burden hours with respect to registered
management investment companies:
     Eight hours for the enhanced director and nominee
disclosure in proxy statements and six hours for such disclosure in
registration statements; \185\ and
---------------------------------------------------------------------------

    \185\ We estimate that the disclosure burden for registration
statements on Forms N-1A, N-2, and N-3 is less than for proxy
statements because the disclosures relating to involvement in legal
proceedings for the past ten years applies only to proxy statements
and not to registration statements.
---------------------------------------------------------------------------

     Six hours for the disclosures about company leadership
structure and the board's role in risk management.
1. Proxy and Information Statements
    For purposes of the PRA, in the case of reporting companies (other
than registered management investment companies) we estimate the annual
incremental paperwork burden for proxy and information statements under
the amendments would be approximately seventeen hours per form for
companies that are smaller reporting companies, and twenty-five hours
per form for companies that are either accelerated or large accelerated
filers. In the case of registered management investment companies, we
estimate the annual incremental paperwork burden for proxy and
information statements under the amendments would be approximately
fourteen hours per form. These estimates include the time and the cost
of preparing disclosure that has been appropriately reviewed by
management, in-house counsel, outside counsel, and members of the board
of directors.
2. Exchange Act Periodic Reports
    For purposes of the PRA, we estimate the annual incremental
paperwork burden for Form 10-K under the amendments would be
approximately one hour per form. This estimate includes the time and
the cost of preparing disclosure that has been appropriately reviewed
by management, in-house counsel, outside counsel, and members of the
board of directors.
3. Securities Act Registration Statements and Exchange Act Registration
Statements
    For purposes of the PRA, in the case of reporting companies (other
than registered management investment companies) we estimate the annual
incremental paperwork burden for Securities Act registration statements
under the amendments would be approximately sixteen hours per
form.\186\ For registered management investment companies, we estimate
that the annual incremental paperwork burden under the amendments to
Forms N-1A, N-2, and N-3 would be approximately twelve hours per form.
These estimates include the time and the cost of preparing disclosure
that has been appropriately reviewed by management, in-house counsel,
outside counsel, and members of the board of directors.
---------------------------------------------------------------------------

    \186\ We calculated the sixteen hours by adding eight hours for
the requirements under Item 402(s) of Regulation S-K to eight hours
for the enhanced director and nominee disclosure.
---------------------------------------------------------------------------

    The tables below illustrate the total annual compliance burden of
the collection of information in hours and in cost under the amendments
for annual reports; quarterly reports; current reports; proxy and
information statements; Form 10; Forms S-1, S-4, S-11, N-1A, N-2, and
N-3; and Regulation S-K.\187\ The burden estimates were calculated by
multiplying the estimated number of responses by the estimated average
amount of time it would take a company to prepare and review the
disclosure requirements. For the Exchange Act reports on Forms 10-K,
10-Q, and 8-K, and the proxy and information statements we estimate
that 75% of the burden of preparation is carried by the company
internally and that 25% of the burden of preparation is carried by
outside professionals retained by the company at an average cost of
$400 per hour. For the registration statements on Forms 10, S-1, S-4,
S-11, N-1A, N-2, and N-3, we estimate that 25% of the burden of
preparation is carried by the company internally and that 75% of the
burden of preparation is carried by outside professionals retained by
the company at an average cost of $400 per hour. The portion of the
burden carried by outside professionals is reflected as a cost, while
the portion of the burden carried by the company internally is
reflected in hours. There is no change to the estimated burden of the
collections of information under Regulation S-K because the burdens
that this regulation imposes are reflected in our revised estimates for
the forms.
---------------------------------------------------------------------------

    \187\ Figures in both tables have been rounded to the nearest
whole number.

           Table 1--Incremental Paperwork Burden Under the Amendments for Annual Reports; Quarterly Reports; Proxy and Information Statements
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Total
                                                        Number of      Incremental      Incremental      75% Company          25%          Professional
                                                        responses     burden hours/     burden hours     (D)=(C)*0.75     professional        costs
                                                        \188\ (A)        form (B)       (C)=(A)*(B)                       (E)=(C)*0.25     (F)=(E)*$400
--------------------------------------------------------------------------------------------------------------------------------------------------------
10-K...............................................          13,545               1           13,545           10,159            3,386       $1,354,500
10-Q \189\.........................................          32,462              (1)          (7,300)          (5,475)          (1,825)        (730,000)
8-K \190\..........................................         117,255               1          117,255           87,941           29,314       11,725,500
Sch. 14A \191\.....................................           7,300  ...............  ...............  ...............  ...............  ...............
    Accel. Filers..................................           3,378              25           84,450           63,338           21,113        8,445,000
    SRC Filers.....................................           3,922              17           66,674           50,006           16,669        6,667,400
Sch. 14C...........................................             680  ...............  ...............  ...............  ...............  ...............
    Accel. Filers..................................             315              25            7,867            5,900            1,967          786,658
    SRC Filers.....................................             365              17            6,211            4,658            1,553          621,073
Rule 20a-1.........................................           1,225              14           17,150           12,863            4,288        1,715,000
Reg. S-K...........................................             N/A             N/A              N/A              N/A              N/A              N/A
                                                    ----------------------------------------------------------------------------------------------------
    Total..........................................  ..............  ...............         305,851   ...............  ...............      30,585,130
--------------------------------------------------------------------------------------------------------------------------------------------------------

                                 Table 2--Incremental Paperwork Burden Under the Amendments for Registration Statements
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Total
                                                             Number of      Incremental     incremental     25% company         75%        Professional
                                                             responses     burden hours/   burden hours    (D)=(C)*0.25    professional        costs
                                                             \192\ (A)       form (B)       (C)=(A)*(B)                    (E)=(C)*0.75    (F)=(E)*$400
--------------------------------------------------------------------------------------------------------------------------------------------------------
Form 10.................................................             238              16           3,809             952           2,856      $1,142,500
Form S-1................................................             768              16          12,288           3,072           9,216      11,579,500
Form S-4................................................             619              16           9,904           2,476           7,428       3,686,400
Form S-11...............................................             100              16           1,600             400           1,200       2,971,200
Form N-1A...............................................           1,935              12          23,220           5,805          17,415       6,966,000
Form N-2................................................             205              12           2,460             615           1,845         738,000
Form N-3................................................              17              12             204              51             153          61,200
Reg. S-K................................................             N/A             N/A             N/A             N/A             N/A             N/A
                                                         -----------------------------------------------------------------------------------------------
    Total...............................................  ..............  ..............          53,485  ..............  ..............      27,144,800
--------------------------------------------------------------------------------------------------------------------------------------------------------

IV. Cost-Benefit Analysis

A. Introduction

    We are adopting amendments to enhance the disclosures with respect
to a company's overall compensation policy and its impact on risk
taking, director and nominee qualifications and legal proceedings,
board leadership structure and the board's role in risk oversight, and
the interests of compensation consultants. In addition, we are adopting
amendments to transfer the requirement to disclose voting results from
Forms 10-Q and 10-K to Form 8-K.
    We also are adopting amendments to the disclosure requirements for
executive and director compensation to require stock awards and option
awards reporting based on a measure that will represent the aggregate
grant date fair value of the compensation decision in the grant year,
rather than the current rule, which allocates the grant date fair value
over time commensurate with financial statement recognition of
compensation costs.
---------------------------------------------------------------------------

    \188\ The number of responses reflected in the table equals the
actual number of forms and schedules filed with the Commission
during the 2008 fiscal year, except for Form 8-K. The number of
responses for Form 8-K reflects the number of Form 8-Ks filed during
the 2008 fiscal year plus an additional 8,831 filings. See footnote
190 below.
    \189\ We calculated the reduction in the burden hours for Form
10-Q based on the number of proxy statements filed with the
Commission during the 2008 fiscal year. We assumed that there would
be, at a minimum, an equal number of Form 10-Qs filed to report the
voting results from a meeting of shareholders. The reduction
reflects the deletion of the disclosure of voting results from the
form.
    \190\ We have included an additional 7,300 responses to Form 8-K
to reflect the additional Form 8-Ks that would be filed to report
final voting results. As explained in footnote 188 above, this
number is based on the actual number of proxy statements filed in
2008. We adjusted this number upward by 20% to reflect our estimate
of the additional Form 8-Ks that may be filed to report preliminary
votes, and we have also included an additional 71 Form 8-Ks to
reflect the number of Form 8-Ks that would be filed to report
preliminary voting results because of a contested election, which we
based on the actual number of proxy statements involving contested
elections that were filed with the Commission during the 2008 fiscal
year.
    \191\ The estimates for Schedule 14A and Schedule 14C are
separated to reflect our estimate of the burden hours and costs
related to new Item 402(s) of Regulation S-K which is applicable to
companies that are either accelerated or large accelerated filers,
but not applicable to companies that are non-accelerated filers,
including smaller reporting companies. We estimate that 3,378
Schedule 14A responses were filed by accelerated or large
accelerated filers, and 315 Schedule 14C responses were filed by
accelerated or large accelerated filers.
    \192\ The number of responses reflected in the table equals the
actual number of forms filed with the Commission during the 2008
fiscal year, except for Forms N-1A and N-3. The number of responses
for Forms N-1A and N-3 reflect the number of open-ended management
investment companies registered with the Commission as of the end of
the 2008 fiscal year.
---------------------------------------------------------------------------

B. Benefits

    The amendments are intended to enhance transparency of a company's
compensation policies and its impact on risk taking; director and
nominee qualifications; board leadership structure and the role of the
board in risk oversight; potential conflicts of interest of
compensation consultants; and voting results at annual and special
meetings.
1. Benefits Related to the New Narrative Disclosure of the Company's
Compensation Policies and Practices as They Relate to the Company's
Risk Management
    Incentive arrangements and other compensation for employees may
affect risk-taking behavior in the company's operations. To the extent
that the risks arising from a company's compensation policies and
practices for employees are reasonably likely to have a material
adverse effect on the company, investors will benefit through an
enhanced ability to monitor it. They would also potentially benefit
from the ability to use this additional information in allocating
capital across companies, toward companies where employee incentives
appear better aligned with operational success and investors' appetite
for risk. The new disclosure may also encourage the board and senior
management to examine and improve incentive structures for management
and employees of the company. These benefits may also lead to increased
value to investors.
2. Benefits Related to Revisions to Summary Compensation Table
Disclosure
    As a result of the Summary Compensation Table and Director
Compensation Table amendments, companies will no longer need to prepare
and report the allocation of equity awards' grant date fair value over
time commensurate with financial statement recognition of compensation
costs for executive and director compensation tabular reporting.
Further, in preparing stock awards and option awards disclosure in the
Summary Compensation Table and Director Compensation Table, companies
no longer will need to incur additional costs to exclude the estimate
for forfeitures related to service-based vesting used for financial
statement reporting purposes. The elimination of costs of preparing and
reporting this information is a benefit of the amendments.
    The effects of the amendments in making information more readily
available to investors may be useful to their voting and investment
decisions. Reporting stock awards and option awards in the Summary
Compensation Table based on aggregate grant date fair value is designed
to make it easier for investors to assess compensation decisions and
evaluate the decisions of the compensation committee. For example,
under the amendments the Summary Compensation Table values will
correspond to awards granted in the fiscal year, potentially allowing
companies to better explain in CD&A

how decisions with respect to awards granted for the year relate to
other compensation decisions in the context of total compensation for
the year. For awards subject to performance conditions, tabular
disclosure will be based upon the probable outcome of the performance
conditions as of the grant date. A special instruction for awards
subject to performance conditions that requires footnote disclosure of
the grant date fair value, assuming that the highest level of
performance conditions will be achieved, will provide investors with
further information as to the maximum potential payout of a particular
grant. Further, the effect on total compensation of decisions to
reprice options will be more evident because aggregate grant date fair
value will be a component of total compensation reported in the Summary
Compensation Table.
    Under the amendments, the identification of named executive
officers based on total compensation for the last completed fiscal year
will reflect the aggregate grant date fair value of equity awards
granted in that year. As a result, the named executive officers other
than the principal executive officer and principal financial officer
may change. Investors may benefit from receiving compensation
disclosure with respect to executives who would not have been named
executive officers under the former rules. To the extent that this
change better aligns the identification of named executive officers
with compensation decisions for the year, it should make it easier for
companies to track executive compensation for reporting purposes.
    Although the amendments are not intended to steer behavior, changes
in the way that executive compensation is represented in the Summary
Compensation Table and other new, compensation-related disclosures may
indirectly lead boards to reconsider pay structure, potentially
changing the amount of pay in some cases.
    Smaller reporting companies are not required to provide a Grants of
Plan-Based Awards Table or a CD&A, but are required to provide a
Summary Compensation Table and Director Compensation Table. Investors
in these companies should benefit from reporting stock awards and
option awards based on aggregate grant date fair value in the grant
year, as opposed to the current reporting approach based on financial
statement recognition of the awards.
3. Benefits Related to Enhanced Director and Nominee Disclosure
    The amendments to Item 401 of Regulation S-K, Schedule 14A and
Forms N-1A, N-2 and N-3 will potentially benefit investors by
increasing the amount and quality of information that they receive
concerning the background and skills of directors and nominees for
director, enabling investors to make better-informed voting and
investment decisions. Disclosure of board's or other proponents'
rationale for their nominees' membership on the board may benefit
investors by enabling them to better assess whether and why a
particular nominee is an appropriate choice for a particular company.
Investors would be able to make more informed voting decisions in
electing directors. Investors would also be able to adjust their
holdings, allocating more capital to companies in which they believe
board members are most likely to be able to effectively fulfill their
duties to shareholders. In particular, in cases that do not meet
investors' expectations, investors may respond by attempting to exert
more influence on management or the board than would occur otherwise,
thereby enhancing shareholder value.
    Required disclosure of whether, and if so, how, a nominating
committee (or the board) considers diversity in connection with
identifying and evaluating persons for consideration as nominees for a
position on the board of directors may also benefit investors. Board
diversity policy is an important factor in the voting decisions of some
investors.\193\ Such investors will directly benefit from diversity
policy disclosure to the extent the policy and the manner in which it
is implemented is not otherwise clear from observing past and current
board selections. Although the amendments are not intended to steer
behavior, diversity policy disclosure may also induce beneficial
changes in board composition. A board may determine, in connection with
preparing its disclosure, that it is beneficial to disclose and follow
a policy of seeking diversity. Such a policy may encourage boards to
conduct broader director searches, evaluating a wider range of
candidates and potentially improving board quality. To the extent that
boards branch out from the set of candidates they would ordinarily
consider, they may nominate directors who have fewer existing ties to
the board or management and are, consequently, more independent. To the
extent that a more independent board is desirable at a particular
company, the resulting increase in board independence could potentially
improve governance. In addition, in some companies a policy of
increasing board diversity may also improve the board's decision-making
process by encouraging consideration of a broader range of views.
---------------------------------------------------------------------------

    \193\ See, e.g., letters from Calvert, Trillium, Boston Common
Asset Management, CII, Florida State Board of Administration, and
Sisters of Charity BVM. See also letter from Lissa Lamkin Broome and
Thomas Lee Hazen.
---------------------------------------------------------------------------

    Expanded disclosure of membership on previous corporate boards may
also benefit investors by making it easier for them to evaluate whether
nominees' past board memberships present potential conflicts of
interest (such as membership on boards of major suppliers, customers,
or competitors). Investors may also be able to more easily evaluate the
performance, in both operations and governance, of the other companies
on whose boards the nominees serve or have served. The public may also
benefit from better understanding any potential positive or negative
effects on corporate performance resulting from directors serving on
other boards.
    The expanded list of legal proceedings involving directors,
nominees and executive officers that must be disclosed, as well as the
expanded disclosure of these legal proceedings from the current five-
year requirement to ten years, would benefit investors by providing
more information by which they could determine the suitability of a
director or nominee.
4. Benefits Related to New Disclosure About Board Leadership Structure
and the Board's Role in Risk Oversight
    Investors may benefit from new disclosure about board leadership
structure. In particular, they may benefit from understanding
management's explanation regarding whether or not the principal
executive officer serves as chairman of the board and, in the case of a
registered management investment company, whether the chairman is an
``interested person'' of the fund. In deciding whether to separate
principal executive officer and chairman positions, companies may
consider several factors, including the effectiveness of communication
with the board and the degree to which the board can exercise
independent judgment about management performance, and shareholders
may, in different cases, be best served by different decisions.
Although the amendments are not intended to drive behavior, there may
be possible benefits if a company re-evaluates its leadership structure
or the

board's role in risk oversight and decides to make changes as a result.
    Disclosures of the board's role in risk oversight may also benefit
investors. Expanded disclosure of the board's role in risk oversight
may enable investors to better evaluate whether the board is exercising
appropriate oversight of risk. Investors would be able to adjust their
holdings, allocating more capital to companies in which they believe
the board is adequately focused on risks. Improved capital allocation
will also benefit the financial markets by increasing market
efficiency.
5. Benefits Related to New Disclosure Regarding Compensation
Consultants
    New disclosure regarding compensation consultants may benefit
investors by illuminating potential conflicts of interest. Providing
better, more complete information in cases where the value of non-
executive compensation services is over $120,000 for the last fiscal
year will allow investors to determine for themselves whether there are
concerns related to the compensation consultants' financial interests
and objectivity. Compensation consultants may earn fees from other
services to the company, including benefits administration, human
resources consulting, and actuarial services. With an incentive to
retain these significant additional revenue streams, they may face
incentives to cater, to some degree, to management preferences in
recommending executive compensation packages.\194\ The House Committee
on Oversight and Government Reform's Study on Executive Pay documented
that 113 of 250 of the largest publicly traded companies hired
compensation consultants that earned fees from other services, and that
this practice was positively correlated with higher CEO pay.\195\
However, Cadman, Carter and Hilligeist (2009) studied a larger set of
companies, but did not find statistically significant relations between
certain factors thought to indicate conflicts of interest and the level
of CEO pay.\196\ To the degree that these potential conflicts may be
more transparent under the amendments, investors benefit through their
ability to better monitor the process of setting executive pay. This
potential conflict is substantially reduced when the compensation
committee hires a compensation consultant that does not provide other
services to the company. Benefits of the amendment may be limited to
the degree that compensation consultants have other potential conflicts
of interest not specifically enumerated in the amendments.
---------------------------------------------------------------------------

    \194\ See letter from Mary Ellen Carter.
    \195\ In December 2007, the U.S. House of Representatives
Committee on Oversight and Government Reform issued a report on the
role played by compensation consultants at large, publicly traded
companies (the ``Waxman Report''). The Waxman Report found that the
fees earned by compensation consultants for providing other services
often far exceed those earned for advising on executive
compensation, and that on average companies paid compensation
consultants over $2.3 million for other services and less than
$220,000 for executive compensation advice. See Staff of House Comm.
on Oversight and Government Reform, 110th Cong., Report on Executive
Pay: Conflicts of Interest Among Compensation Consultants (Comm.
Print 2007).
    \196\ Cadman, Carter and Hilligeist, 2009, The Incentives of
Compensation Consultants and CEO Pay, Journal of Accounting and
Economics (forthcoming) and provided with the letter submitted by
Mary Ellen Carter.
---------------------------------------------------------------------------

    Disclosures about compensation consultants may have effects on
competition in the compensation consulting industry, introducing
potential relative costs and benefits to both multi-service consulting
firms and consulting firms exclusively specializing in executive
compensation. Specific potential effects on competition are discussed
in Section V below. Broadly, the disclosures may affect the level of
competition in the compensation consulting industry. Any increase in
competition could reduce prices of consulting services, benefiting
client companies. Changes in competition may also affect the content of
advice provided to companies. As discussed more fully in Section C
below, it is possible that, if the level of competition in the industry
decreases, compensation consultants may be less inclined to make
recommendations favorable to management. This could potentially benefit
shareholders.
6. Benefits Related to Reporting of Voting Results on Form 8-K
    The amendments to Form 8-K will facilitate security holder access
to faster disclosure of the vote results of a company's annual or
special meeting. To find this information, investors no longer would
need to wait for this information to be disclosed in a Form 10-Q or 10-
K, which could be filed months after the end of the meeting.

C. Costs

    The amendments will impose new disclosure requirements on
companies. Some of the disclosures are designed to build upon existing
requirements to elicit a more detailed discussion of director and
nominee qualifications, legal proceedings, and the interests of
compensation consultants. To the degree that the amendments require
collecting information currently available, costs related to
information collection will be limited.
1. Costs Related to the New Narrative Disclosure of the Company's
Compensation Policies and Practices as They Relate to the Company's
Risk Management
    We believe that there may be information gathering costs associated
with the new disclosure of the company's compensation policies and
practices as they relate to the company's risk management, even though
the information required may be readily available, because this
information may need to be reported up from business units and
analyzed. Some commenters noted that the amendments would require
companies to incur additional costs, such as costs related to
conducting a risk analysis of compensation policies for all
employees.\197\ This could also include the cost of hiring additional
advisors to assist in the analysis, as well as additional costs in
drafting the new disclosure. Using our PRA burden estimates, we
estimate the aggregate annual cost of the amendments to be
approximately $12,215,326.\198\ As previously discussed, the proposed
amendments would have required discussion and analysis of compensation
policies if risks arising from those compensation policies ``may have a
material effect on the company.'' We have revised the amendment to
require a company to discuss its compensation policies and practices
for employees if such policies and practices are ``reasonably likely to
have a material adverse effect'' on the company. By focusing on risks
that are ``reasonably likely to have a material adverse effect'' on the
company, we believe the amendments will result in a smaller number of
companies making this risk disclosure. This change from the ``may have
a material effect'' disclosure should mitigate some of the costs and
burdens associated with the amendments.
---------------------------------------------------------------------------

    \197\ See, e.g., letters from Business Roundtable and Robert
Ahrenholz.
    \198\ This estimate is based on the estimated total burden hours
of the amendments associated with the schedules and forms that would
include the new disclosure, an assumed 75%/25% split of the burden
hours between internal staff and external professionals with respect
to proxy and information statements, an assumed 25%/75% split of the
burden hours between internal staff and external professionals with
respect to registration statements, and an hourly rate of $200 for
internal staff time and $400 for external professionals.
---------------------------------------------------------------------------

    Companies may also face costs related to the disclosure of the
company's compensation policies to the extent that

it provides management with incentives to adopt risk-averse strategies
that result in the abandonment of risky projects whose returns
otherwise would compensate for the amount of additional risk. This
could discourage beneficial risk-taking behavior.
2. Costs Related to Revisions to Summary Compensation Table Disclosure
    Investors may face some costs related to revisions in executive
compensation reporting. Under the amendments to the Summary
Compensation Table and as noted in the Benefits section, the
identification of named executive officers based on total compensation
for the last completed fiscal year will reflect the aggregate grant
date fair value of equity awards granted in that year, so that some
executives subject to executive compensation disclosure may be
different.
    Smaller reporting companies, which are not required to provide the
Grants of Plan-Based Awards Table, may incur some costs on a
transitional basis in switching from the previously required measure of
stock awards and option awards to aggregate grant date fair value
reporting. We expect that any such additional costs will be limited by
the fact that grant date fair value information required under the
amendments is also collected to comply with financial reporting
purposes. Because companies other than smaller reporting companies
previously were required to report the grant date fair value of
individual equity awards in the Grants of Plan-Based Awards Table, we
expect that they will incur only negligible costs in switching to the
amended Summary Compensation Table and Director Compensation Table
disclosure requirements.
    Moreover, grant date fair value guidelines under FASB ASC Topic 718
call for management to exercise judgment in valuing stock options. For
financial statement recognition purposes, the grant date fair value
measure of compensation cost is expensed over the expected term of the
option. Compensation cost for awards containing a performance-based
vesting condition is recognized only if it is probable that the
performance condition will be achieved. To the extent that an investor
believes that Summary Compensation Table and Director Compensation
Table disclosure of stock awards and option awards should be measured
based on financial statement recognition principles to take into
account potential adjustments, the amendments may entail a cost. The
special instruction for awards subject to performance conditions
mitigates this potential cost to some extent by providing that such
awards are reported in the Summary Compensation Table and Director
Compensation Table based upon the probable outcome of the performance
condition(s) as of the grant date. This instruction also requires
footnote disclosure of the maximum value assuming the highest level of
performance conditions is probable. We believe that any incremental
cost associated with providing this footnote disclosure would be
minimal.
3. Costs Related to Enhanced Director and Nominee Disclosure
    Companies may face some information gathering and reporting costs
related to enhanced director and nominee disclosure. One commenter
noted that companies may face costs related to the amendments to the
extent that companies will need to update their director and officer
questionnaires to obtain more detailed information, and will need to
spend additional time analyzing the information as well as preparing
the disclosures.\199\ Companies may also experience increased costs as
it may be more difficult to find candidates willing to serve on boards
if they do not want this information disclosed in a Commission filing.
To the extent that information is available and verifiable through
other sources, however, we expect the potential costs of the additional
disclosure will be limited. Using our PRA burden estimates, we estimate
the aggregate annual cost to operating companies to be approximately
$20,790,000.\200\ With respect to our PRA burden estimates for
registered management investment companies, we estimate the aggregate
annual cost to be approximately $6,979,700.\201\
---------------------------------------------------------------------------

    \199\ See letter from Business Roundtable.
    \200\ This estimate is based on the estimated total burden hours
of the amendments associated with the schedules and forms that would
include the new disclosures, an assumed 75%/25% split of the burden
hours between internal staff and external professionals with respect
to proxy and information statements, an assumed 25%/75% split of the
burden hours between internal staff and external professionals with
respect to registration statements, and an hourly rate of $200 for
internal staff time and $400 for external professionals.
    \201\ This estimate is based on the estimated total burden hours
of 22,742, an assumed 75%/25% split of the burden hours between
internal staff and external professionals with respect to proxy
statements, an assumed 25%/75% split of the burden hours between
internal staff and external professionals with respect to
registration statements, and an hourly rate of $200 for internal
staff time and $400 for external professionals.
---------------------------------------------------------------------------

    In addition, although the amendments are not intended to steer
behavior, a company may adopt a diversity policy in connection with
preparing its disclosure regarding whether and, if so, how diversity is
considered in connection with identifying and evaluating persons for
consideration as nominees for a position on the board of directors. If
this policy turns out to be difficult to implement, companies could
incur economic costs as a result in the form of recruiting costs or
otherwise.
4. Costs Related to New Disclosure About Board Leadership Structure and
the Board's Role in Risk Oversight
    Companies may face some costs related to new disclosure about board
leadership structure. Disclosure of the board's role in risk oversight
may have some similar costs. The information gathering costs are likely
to be less significant than the costs to prepare the disclosure. Using
our PRA burden estimates, we estimate the aggregate annual cost to
operating companies to be approximately $11,970,000.\202\ With respect
to our PRA burden estimates for registered management investment
companies, we estimate the aggregate annual cost to be approximately
$6,367,200.\203\ Although the amendments are not intended to drive
behavior, there may be possible costs if a company re-evaluates its
leadership structure or the board's role in risk oversight and decides
to make changes as a result.
---------------------------------------------------------------------------

    \202\ This estimate is based on the estimated total burden hours
of the amendments associated with the schedules and forms that would
include the new disclosures, an assumed 75%/25% split of the burden
hours, and an hourly rate of $200 for internal staff time and $400
for external professionals.
    \203\ This estimate is based on the estimated total burden hours
of 20,292, an assumed 75%/25% split of the burden hours between
internal staff and external professionals with respect to proxy
statements, an assumed 25%/75% split of the burden hours between
internal staff and external professionals with respect to
registration statements, and an hourly rate of $200 for internal
staff time and $400 for external professionals.
---------------------------------------------------------------------------

5. Costs Related to New Disclosure Regarding Compensation Consultants
    Companies may face some costs related to new disclosure about fees
for compensation consulting and for other services provided by
compensation consultants. Using our PRA burden estimates, we estimate
the aggregate annual cost to be approximately $5,985,000.\204\ In
addition, the costs to a company in contracting with compensation
consultants could be increased under these amendments, and compensation
consultants also may alter

their mix of services. For instance, costs may increase if companies
decide to contract with multiple compensation consultants for services
that had previously been provided by only one compensation consultant.
Several commenters asserted that the amendments could discourage
companies from using a single compensation consulting firm to provide
executive compensation services and services other than executive
compensation consulting.\205\ Possible increased costs might include
the costs associated with the time each new compensation consultant
will need to learn about the company and the decline in any economies
of scale the compensation consultant may have factored into fees
charged to the company. To the extent that compensation consulting
firms exit compensation consulting to eliminate potential conflicts and
mandatory fee disclosure, fewer experienced consultants may be
available for hire. To the extent that the remaining consultants cannot
scale operations sufficiently quickly to meet demand, then this could
result in less qualified opinions from remaining consultants, with
potential costs to shareholders. In the long run, however, industry
capacity may increase, which would mitigate this effect.
---------------------------------------------------------------------------

    \204\ This estimate is based on the estimated total burden hours
related to the amendments in connection to Schedules 14A and 14C, an
assumed 75%/25% split of the burden hours, and an hourly rate of
$200 for internal staff time and $400 for external professionals.
    \205\ See, e.g., letters from Mercer, Towers Perrin and Watson
Wyatt.
---------------------------------------------------------------------------

    Disclosures on compensation consultants may have effects on
competition in the compensation consulting industry, introducing
potential relative costs and benefits to multi-service consulting firms
and consulting firms specializing in executive compensation. Specific
potential effects on competition are discussed in the Section V below.
As discussed in more detail in Section V, competition could conceivably
decrease if some multi-service firms exit the executive compensation
consulting industry. Any decrease in competition could increase prices
of consulting services, potentially creating higher costs for client
companies, while benefiting the compensation consulting industry as a
whole. However, competition could increase, for example, to the extent
that the amendments make smaller boutique firms more attractive to
companies. If the amendments increase competitiveness of the industry,
compensation consultants may charge lower fees. They may also, however,
feel pressure to generate recommendations favorable to management in
order to increase the likelihood of being retained in the future. Any
decline in the objectivity of advice from compensation consultants
would potentially be costly to shareholders.
6. Costs Related to Reporting of Voting Results on Form 8-K
    Shareholders who are used to receiving this information in a Form
10-Q filing may incur costs of adapting their research practices to
find this information in Form 8-K filings, which may involve searching
through a number of filings. This adjustment may involve costs, in
particular, to those investors who process this information using
automated systems. A separate filing to report the information and
potentially report both preliminary and final voting results may also
increase direct costs to companies for filing fees, filing creation,
and report dissemination because it may require two Form 8-K filings.
However, the cost for preparing a quarterly report on Form 10-Q would
be less because this disclosure would not appear in that Form.
Companies that report preliminary voting results may face some
additional information gathering and reporting costs because they would
need to file a Form 8-K to disclose preliminary voting results and to
file an amended Form 8-K to disclose final vote results. Using our PRA
burden estimates, we estimate the aggregate annual cost to be
approximately $2,207,750.\206\
---------------------------------------------------------------------------

    \206\ This estimate is based on the estimated 8,831 additional
Form 8-K filings, an assumed 75%/25% split of one burden hour
between internal staff and external professionals, and an hourly
rate of $200 for internal staff time and $400 for external
professionals.
---------------------------------------------------------------------------

V. Consideration of Impact on the Economy, Burden on Competition and
Promotion of Efficiency, Competition and Capital Formation

    Section 23(a)(2) of the Exchange Act requires us,\207\ when
adopting rules under the Exchange Act, to consider the impact that any
new rule would have on competition. In addition, Section 23(a)(2)
prohibits us from adopting any rule that would impose a burden on
competition not necessary or appropriate in furtherance of the purposes
of the Exchange Act.
---------------------------------------------------------------------------

    \207\ 15 U.S.C. 78w(a)(2).
---------------------------------------------------------------------------

    Section 2(b) of the Securities Act,\208\ Section 3(f) of the
Exchange Act,\209\ and Section 2(c) of the Investment Company Act
require us,\210\ when engaging in rulemaking where we are required to
consider or determine whether an action is necessary or appropriate in
the public interest, to consider, in addition to the protection of
investors, whether the action will promote efficiency, competition, and
capital formation.
---------------------------------------------------------------------------

    \208\ 15 U.S.C. 77b(b).
    \209\ 15 U.S.C. 78c(f).
    \210\ 15 U.S.C. 80a-2(c).
---------------------------------------------------------------------------

    The amendments that we are adopting are designed to enhance the
information companies provide to investors with regard to the
following:
     Risk: By requiring disclosure about the board's role in
oversight of risk and, to the extent that risks arising from a
company's compensation policies and practices are reasonably likely to
have a material adverse effect on the company, disclosure about such
policies and practices as they relate to risk management;
     Governance and Director Qualifications: By requiring
expanded disclosure of the background and qualifications of directors
and director nominees and new disclosure about a company's board
leadership structure, and accelerating the reporting of information
regarding shareholder voting results; and
     Compensation: By revising the reporting of stock and
option awards received by named executive officers, and requiring
disclosure of potential conflicts of interest of compensation
consultants in certain circumstances.
    The amendments are designed to enable investors to make better
informed voting and investment decisions. For example, several
commenters noted that investors will be able to use the new risk
disclosures to make more informed investment decisions.\211\ Improved
investment decisions could lead to increased efficiency and
competitiveness of the U.S. capital markets. Investors could allocate
capital across companies, toward companies where the risk incentives
are more aligned with an investor's risk preference. In this regard,
the amendments may affect the relative ability of some companies to
raise capital depending on how investors react to the disclosures they
provide in response to the amendments. In addition, the amendments may
improve the efficiency of information gathering by investors to the
extent that disclosure provided in response to the amendments is easier
to access through filings made with the Commission.
---------------------------------------------------------------------------

    \211\ See, e.g., letters from CalSTRS, CII, the General Board of
Pension and Health Benefits of the United Methodist Church, and
Hermes.
---------------------------------------------------------------------------

    The amendments may affect competition, such as encouraging
competition among companies to demonstrate superior risk oversight and
improved incentive structures for management and the employees of the
company. Several commenters indicated

that the amendments requiring fee and other disclosures related to
compensation consultants might have some effects on competition among
firms in this industry. Some of these commenters believed the
amendments could negatively impact competition among large multi-
service compensation consulting firms.\212\ Companies will face new
disclosure requirements with respect to their use of compensation
consulting firms in certain circumstances, but not with respect to
compensation consulting firms who provide only executive compensation
consulting services. To the extent that companies receiving
compensation for consulting services are reluctant to disclose the fees
paid for advice on executive compensation, this may put some larger
multi-service compensation consulting firms at a competitive
disadvantage relative to smaller firms who focus on executive
compensation consulting. In such cases, multi-service firms may be
excluded from competing for compensation consulting services at
companies where they already provide other non-executive compensation
consulting services. However, this potential anti-competitive impact
may be diminished to the extent that the potential opportunities lost
to some multi-service firms would otherwise be available to other
multi-service firms who do not provide non-executive compensation
consulting services to the company. To the extent that this occurs,
competition between multi-service firms could increase. In addition,
the amendments provide a limited exception to the disclosure
requirements for fees paid to other compensation consultants retained
by the company if the board has retained its own consultant that
reports to the board. This exception limits disclosure to circumstances
that are more likely to present conflicts of interest, which should
also address concerns about the competitive disadvantage faced by
multi-service firms.
---------------------------------------------------------------------------

    \212\ See, e.g., letters from Hewitt, Mercer and Towers Perrin.
---------------------------------------------------------------------------

    In some instances, the amendments may result in disclosure of
pricing information that certain compensation consulting firms would
prefer to remain private, which could affect some consulting firms'
marginal cost of providing executive compensation and non-executive
compensation services. Competition in the compensation consulting
industry also may be affected if, for example, some compensation
consulting firms choose not to provide executive compensation
consulting services to avoid having to disclose fees on other, more
critical aspects of their businesses. If multi-service compensation
consulting firms currently use cross-selling synergies to subsidize
their compensation consulting services for the purpose of soliciting
other business, then their departure may result in an increase in fees,
which may better approximate the stand-alone value of the services and
promote competition from new market participants who could not
otherwise subsidize compensation consulting services.
    Conversely, the amendments may increase competition in the
executive compensation consulting industry. If certain larger
compensation consulting firms currently enjoy an advantage related to
their ability to cross sell services, for example, where management is
more likely to recommend to the board a compensation consultant with
whom management has prior experience, the marginal cost of providing
services may be lower, currently, than it is for smaller compensation
consulting firms. In this circumstance, any additional marginal costs
related to disclosure by multi-service firms may have the effect of
making marginal costs faced by multi-service firms and boutique firms
more equal, allowing boutique firms to compete more effectively. This
may encourage entry into compensation consulting services by more
firms, or at least make the threat of their entry more credible. If the
number of multi-service compensation consulting firms is limited,
relative to potential entrants, the level of effective competition in
the industry may increase. The industry may also become more
competitive for other reasons. For example, more public availability of
aggregate fee disclosure, in general, may provide an informational
advantage to companies as they negotiate with potential compensation
consulting firms, effectively lowering the price of consulting
services. Additionally, pricing disclosed, either publicly or in
private negotiation, may more accurately reflect each particular
service provided. If multi-service compensation consulting firms
currently use cross-selling synergies to subsidize their compensation
consulting services for the purpose of soliciting other business, then
an increase in fees resulting from their departure may better
approximate the stand-alone value of the services and promote
competition from new market participants who could not otherwise
subsidize compensation consulting services.
    The size of the market for compensation consulting services is
large; depending on the assumptions, we estimate that the total fee
revenues of the compensation consulting market could be in the range of
$480 million to $3.7 billion. The lower approximate bound is calculated
using the $200,000 average per firm fee for executive compensation
advice paid by the 250 large companies studied in the Waxman Report,
and an estimated 2,190 companies from the Russell 3000 index that
report using an executive compensation consultant.\213\ The lower
estimate could be higher to the extent that non-Russell 3000 companies
also hire compensation consultants, or lower to the extent that smaller
companies pay less than $200,000 for compensation consulting advice.
The upper approximate bound is calculated from the periodic reports of
the four largest multi-service compensation consulting firms: Towers
Perrin, Mercer, Hewitt, and Watson Wyatt. These four firms reported
2008 fiscal year-end total revenues of $9.9 billion, of which $2.16
billion was disclosed as generated from compensation consulting
activities, but which could include non-executive compensation
consulting services.\214\ Considering that these four firms represent
approximately 58% of the compensation consulting market,\215\ this
indicates the total compensation consulting market could be $3.7
billion.
---------------------------------------------------------------------------

    \213\ See letter from Mary Ellen Carter.
    \214\ Hewitt reported 33% of total revenues ($990 million) from
Talent and Organizational Consulting; Mercer reported $550 million
in consulting revenue from management and rewarding of employees,
the design of remuneration programs, and improvement of human
resource effectiveness; Watson Wyatt reported 10% of total revenues
($167 million) from its Human Capital Group, which included
providing advice on compensation plans and other long-term incentive
programs; Towers Perrin reported 26.6% of total revenues ($450
million) from Talent and Rewards Consulting.
    \215\ See letter from Mary Ellen Carter.
---------------------------------------------------------------------------

VI. Final Regulatory Flexibility Analysis

    This Final Regulatory Flexibility Analysis (``FRFA'') has been
prepared in accordance with the Regulatory Flexibility Act.\216\ This
FRFA relates to amendments to Regulation S-K, Schedule 14A and Forms 8-
K, 10-Q, and 10-K under the Exchange Act, and Forms N-1A, N-2, and N-3,
under the Investment Company Act. The amendments will require the
following:
---------------------------------------------------------------------------

    \216\ 5 U.S.C. 601.
---------------------------------------------------------------------------

     To the extent that risks arising from a company's
compensation policies and practices for employees are reasonably likely
to have a material adverse effect on the company, discussion of the
company's compensation policies or practices as they relate to risk

management and risk-taking incentives that can affect the company's
risk and management of that risk;
     Reporting of the aggregate grant date fair value of stock
awards and option awards granted in the fiscal year in the Summary
Compensation Table and Director Compensation Table to be computed in
accordance with FASB ASC Topic 718, with a special instruction for
awards subject to performance conditions;
     New disclosure of the qualifications of directors and
nominees for director, and the reasons why that person should serve as
a director of the company at the time at which the relevant filing is
made with the Commission; the same information would be required with
respect to directors nominated by others;
     Additional disclosure of any directorships held by each
director and nominee at any time during the past five years at any
public company or registered investment company;
     Additional disclosure of other legal actions involving a
company's executive officers, directors, and nominees for director, and
lengthening the time during which such disclosure is required from five
to ten years;
     New disclosure about a company's board leadership
structure and the board's role in the oversight of risk;
     New disclosure regarding the consideration of diversity in
the process by which candidates for director are considered for
nomination by a company's nominating committee;
     New disclosure about the fees paid to compensation
consultants and their affiliates under certain circumstances; and
     Reporting of the vote results from a meeting of
shareholders on Form 8-K generally within four business days of the
meeting.

An Initial Regulatory Flexibility Analysis (``IRFA'') was prepared in
accordance with the Regulatory Flexibility Act and included in the
Proposing Release.

A. Need for the Amendments

    As described both in this release and the Proposing Release, during
the past few years, investors have increasingly focused on corporate
accountability, and have expressed the desire for additional
information that would enhance their ability to make informed voting
and investment decisions. The amendments are intended to improve the
disclosure shareholders of public companies receive regarding
compensation and corporate governance, and facilitate communications
relating to voting decisions. We believe the amendments will enhance
the transparency of a company's compensation policies and practices,
and the impact of such policies and practices on risk taking; director
and nominee qualifications; board leadership structure; the potential
conflicts of compensation consultants; and will provide investors with
clearer and more meaningful executive compensation disclosure.

B. Significant Issues Raised by Public Comments

    In the Proposing Release, we requested comment on any aspect of the
IRFA, including the number of small entities that would be affected by
the proposed amendments, the nature of the impact, how to quantify the
number of small entities that would be affected, and how to quantify
the impact of the proposed amendments. We did not receive comments
specifically addressing the IFRA. However, several commenters addressed
aspects of the proposed rule amendments that could potentially affect
small entities. In particular, some commenters believed that compliance
with the proposed amendments would impose a significant burden on
smaller companies.\217\ Other commenters believed that smaller
companies should be exempted from all or parts of the amendments.\218\
Although we believe that a complete exemption from the amendments would
not be appropriate because this would interfere with achieving the goal
of enhancing the information provided to all investors, we have made
revisions to the amendments that we believe will significantly reduce
the impact of the amendments on reporting companies, including smaller
companies. In addition, we did not propose, and we are not at this time
adopting, a requirement that smaller companies discuss their
compensation policies and practices for employees if such policies and
practices are reasonably likely to have a material adverse effect.
---------------------------------------------------------------------------

    \217\ See letters from Keith Bishop and Theragenics.
    \218\ See, e.g., letters from the Committee on Securities Law of
the Business Law Section of the Maryland State Bar Association and
Theragenics.
---------------------------------------------------------------------------

C. Small Entities Subject to the Final Amendments

    The amendments will affect some companies that are small entities.
The Regulatory Flexibility Act defines ``small entity'' to mean ``small
business,'' ``small organization,'' or ``small governmental
jurisdiction.'' \219\ The Commission's rules define ``small business''
and ``small organization'' for purposes of the Regulatory Flexibility
Act for each of the types of entities regulated by the Commission.
Securities Act Rule 157 \220\ and Exchange Act Rule 0-10(a) \221\
defines a company, other than an investment company, to be a ``small
business'' or ``small organization'' if it had total assets of $5
million or less on the last day of its most recent fiscal year. We
estimate that there are approximately 1,229 companies, other than
registered investment companies, that may be considered small entities.
The amendments to Regulation S-K, Schedule 14A and Forms 8-K, 10-Q, and
10-K will affect any small entity that is subject to Exchange Act
periodic and proxy reporting requirements. In addition, the amendments
also will affect small entities that file a registration statement
under the Securities Act.
---------------------------------------------------------------------------

    \219\ 5 U.S.C. 601(6).
    \220\ 17 CFR 230.157.
    \221\ 17 CFR 240.0-10(a).
---------------------------------------------------------------------------

    An investment company is considered to be a ``small business'' if
it, together with other investment companies in the same group of
related investment companies, has net assets of $50 million or less as
of the end of its most recent fiscal year.\222\ We believe that the
amendments will affect small entities that are investment companies. We
estimate that there are approximately 162 investment companies that may
be considered small entities.
---------------------------------------------------------------------------

    \222\ 17 CFR 270.0-10(a).
---------------------------------------------------------------------------

D. Reporting, Recordkeeping, and Other Compliance Requirements

    The amendments are designed to enhance the transparency of boards
of directors, provide investors with a better understanding of the
functions and activities of boards, and to provide investors with
clearer and more meaningful compensation disclosure. These amendments
will require small entities that are operating companies to provide:
     Reporting stock awards and option awards in the Summary
Compensation Table and Director Compensation Table based on aggregate
grant date fair value;
     Disclosure of the qualifications of directors and nominees
for director, and a brief discussion of the specific experience,
qualifications, attributes or skills that led to the conclusion that
the person should serve as a director for the company at the time the
disclosure is made, in light of the company's business and structure;
     Additional disclosure concerning certain legal proceedings
involving a company's directors, nominees for director and executive
officers;
     Disclosure regarding the consideration of diversity in the
process

by which candidates for director are considered for nomination by a
company's nominating committee;
     Additional disclosure, in certain instances, about
compensation consultants retained by the board of directors; and
     Disclosure of the results of shareholder votes on Form 8-K
generally within four business days after the end of the meeting.
    In addition, these amendments would require small entities that are
registered management investment companies to provide:
     Disclosure of the qualifications of directors and nominees
for director, and the reasons why that person should serve as a
director of the company at the time at which the relevant filing is
made with the Commission;
     Disclosure of any directorships held by each director and
nominee at any time during the past five years at public companies or
registered management investment companies; and
     Disclosure about a fund's board leadership structure and
the board's role in the oversight of risk.

E. Agency Action To Minimize Effect on Small Entities

    The Regulatory Flexibility Act directs us to consider alternatives
that would accomplish our stated objectives, while minimizing any
significant adverse impact on small entities. In connection with the
disclosure amendments, we considered the following alternatives:
     Establishing different compliance or reporting
requirements or timetables that take into account the resources
available to small entities;
     Clarifying, consolidating or simplifying compliance and
reporting requirements under the rules for small entities;
     Using performance rather than design standards; and
     Exempting small entities from all or part of the
requirements.
    In connection with the amendments, we considered alternatives,
including establishing different compliance or reporting requirements
that take into account the resources available to small entities,
clarifying or simplifying compliance and reporting requirements under
the amendments for small entities, using design rather than performance
standards, and exempting small entities from all or part of the
amendments.
    Under our current rules, small entities are subject to some
different compliance or reporting requirements under Regulation S-K,
and the amendments do not alter these requirements. Under Regulation S-
K, small entities are required to provide abbreviated compensation
disclosure with respect to the principal executive officer and two most
highly compensated executive officers for the last two completed fiscal
years. Specifically, small entities may provide the executive
compensation disclosure specified in Items 402(l) through (r) of
Regulation S-K, rather than the corresponding disclosure specified in
Items 402(a) through (k) of Regulation S-K. Items 402(l) through (r)
also do not require small entities to provide CD&A or the Grants of
Plan-Based Awards Table. The amendments to the Summary Compensation
Table and Director Compensation Table are unlikely to have a
significant impact on small entities because their principal effect is
to disclose stock and option awards based on grant date fair value,
which small entities need to compute for financial reporting purposes.
We did not propose, and we are not adopting, a requirement that smaller
companies discuss their compensation policies and practices for
employees if such policies and practices are reasonably likely to have
a material adverse effect. In addition, the amendments to the Grants of
Plan-Based Awards Table do not apply to small entities.
    We considered, but did not establish additional different
compliance requirements for small entities. We believe that investors
in companies that are small entities may want and would benefit from
the disclosures elicited by the amendments regarding director and
nominee qualifications, as well as board leadership and risk oversight.
For example, many commenters noted that our amendments to enhance
director and nominee disclosure would provide investors with additional
information that would allow them to make better informed investment
and voting decisions.\223\ Different compliance requirements or an
exemption for small entities would interfere with achieving the goal of
enhancing the information provided to all investors. We believe that
uniform and comparable disclosures across all companies will help
investors and the markets.
---------------------------------------------------------------------------

    \223\ See, e.g., letters from Board of Directors Network, Forum
of Executive Women, Integrated Governance Solutions, and Norges
Bank.
---------------------------------------------------------------------------

    We also considered, but did not establish, different disclosure
thresholds for small entities under our amendments regarding
compensation consultant disclosure. Although the disclosure exclusion
provided in the amendment where the fees for non-executive compensation
consulting services do not exceed $120,000 for a company's fiscal year
will reduce the compliance burdens for all companies, we believe this
change will likely be more meaningful to companies that are small
entities because these companies likely expend a lesser amount of their
revenues on compensation consulting services.
    The amendments clarify, consolidate and simplify the reporting
requirements for all public companies including small entities. The
amendments require clear and straightforward disclosure of director and
nominee qualifications, board leadership structure and the potential
conflicts of interest of compensation consultants. We have used a mix
of design and performance standards in connection with the amendments.
Based on our past experience, we believe the amendments will be more
useful to investors if there are specific disclosure requirements,
however, some of the new requirements provide companies flexibility in
determining what information to disclose. The disclosures are intended
to result in more comprehensive and clearer disclosure.

VII. Statutory Authority and Text of the Amendments

    The amendments contained in this release are being adopted under
the authority set forth in Sections 3(b), 6, 7, 10, and 19(a) of the
Securities Act; Sections 12, 13, 14, 15(d) and 23(a) of the Exchange
Act; and Sections 8, 20(a), 24(a), 30 and 38 of the Investment Company
Act.

List of Subjects

    17 CFR Parts 229, 239, 240, 249 and 274 Reporting and recordkeeping
requirements, Securities.

Text of the Amendments

0
For the reasons set out in the preamble, the Commission amends title
17, chapter II, of the Code of Federal Regulations as follows:

PART 229--STANDARD INSTRUCTIONS FOR FILING FORMS UNDER SECURITIES
ACT OF 1933, SECURITIES EXCHANGE ACT OF 1934 AND ENERGY POLICY AND
CONSERVATION ACT OF 1975--REGULATION S-K

0
1. The authority citation for part 229 continues to read in part as
follows:

    Authority: 15 U.S.C. 77e, 77f, 77g, 77h, 77j, 77k, 77s, 77z-2,
77z-3, 77aa(25), 77aa(26), 77ddd, 77eee, 77ggg, 77hhh, 777iii,
77jjj, 77nnn, 77sss, 78c, 78i, 78j, 78l, 78m, 78n, 78o, 78u-5, 78w,
78ll, 78mm, 80a-8, 80a-9, 80a-20, 80a-29, 80a-30, 80a-31(c), 80a-37,
80a-38(a), 80a-39, 80b-11, and 7201 et seq.; and 18 U.S.C. 1350,
unless otherwise noted.
* * * * *

0
2. Amend Sec.  229.401 by:
0
a. Revising paragraph (e)(1);
0
b. In paragraph (e)(2) revising the phrase ``Indicate any other
directorships'' to read ``Indicate any other directorships held,
including any other directorships held during the past five years,'';
0
c. In paragraph (f), introductory text, revising the phrase ``during
the past five years'' to read ``during the past ten years'';
0
d. Removing the word ``or'' following the semi-colon at the end of
paragraph (f)(4);
0
e. Removing the period at the end of paragraphs (f)(5) and (f)(6) and
adding in their place a semi-colon;
0
f. Adding paragraphs (f)(7) and (f)(8) before the Instructions to
paragraph (f);
0
g. In the Instruction 1 to paragraph (f) revise the phrase ``For
purposes of computing the five year period'' to read ``For purposes of
computing the ten-year period''; and
0
h. Adding Instruction 5 to the Instructions to paragraph (f).
    The revisions and additions read as follows:

Sec.  229.401  (Item 401) Directors, executive officers, promoters and
control persons.

* * * * *
    (e) Business experience. (1) Background. Briefly describe the
business experience during the past five years of each director,
executive officer, person nominated or chosen to become a director or
executive officer, and each person named in answer to paragraph (c) of
Item 401, including: each person's principal occupations and employment
during the past five years; the name and principal business of any
corporation or other organization in which such occupations and
employment were carried on; and whether such corporation or
organization is a parent, subsidiary or other affiliate of the
registrant. In addition, for each director or person nominated or
chosen to become a director, briefly discuss the specific experience,
qualifications, attributes or skills that led to the conclusion that
the person should serve as a director for the registrant at the time
that the disclosure is made, in light of the registrant's business and
structure. If material, this disclosure should cover more than the past
five years, including information about the person's particular areas
of expertise or other relevant qualifications. When an executive
officer or person named in response to paragraph (c) of Item 401 has
been employed by the registrant or a subsidiary of the registrant for
less than five years, a brief explanation shall be included as to the
nature of the responsibility undertaken by the individual in prior
positions to provide adequate disclosure of his or her prior business
experience. What is required is information relating to the level of
his or her professional competence, which may include, depending upon
the circumstances, such specific information as the size of the
operation supervised.
* * * * *
    (f) * * *
    (7) Such person was the subject of, or a party to, any Federal or
State judicial or administrative order, judgment, decree, or finding,
not subsequently reversed, suspended or vacated, relating to an alleged
violation of:
    (i) Any Federal or State securities or commodities law or
regulation; or
    (ii) Any law or regulation respecting financial institutions or
insurance companies including, but not limited to, a temporary or
permanent injunction, order of disgorgement or restitution, civil money
penalty or temporary or permanent cease-and-desist order, or removal or
prohibition order; or
    (iii) Any law or regulation prohibiting mail or wire fraud or fraud
in connection with any business entity; or
    (8) Such person was the subject of, or a party to, any sanction or
order, not subsequently reversed, suspended or vacated, of any self-
regulatory organization (as defined in Section 3(a)(26) of the Exchange
Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in
Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or
any equivalent exchange, association, entity or organization that has
disciplinary authority over its members or persons associated with a
member.
    Instructions to Paragraph (f) of Item 401:
* * * * *
    5. This paragraph (f)(7) shall not apply to any settlement of a
civil proceeding among private litigants.
* * * * *

0
3. Amend Sec.  229.402 by:
0
a. Revising paragraphs (c)(2)(v) and (c)(2)(vi);
0
b. Removing the Instruction to Item (c)(2)(v) and (vi), and adding in
its place Instructions 1, 2, and 3 to Item (c)(2)(v) and (vi) before
paragraph (c)(2)(vii);
0
c. Revising paragraph (c)(2)(ix)(G);
0
d. Removing the period at the end of paragraphs (d)(2)(iii) and
(d)(2)(iv) and adding a semi-colon in their place;
0
e. Adding Instruction 8 to Item 402(d);
0
f. Revising paragraphs (k)(2)(iii) and (k)(2)(iv);
0
g. Revising paragraph (k)(2)(vii)(I) and Instruction to Item 402(k);
0
h. In paragraph (l) revising the phrase ``paragraphs (a) through (k)''
to read ``paragraphs (a) through (k) and (s)'';
0
i. Revising paragraphs (n)(2)(v) and (n)(2)(vi);
0
j. Removing the Instruction to Item 402(n)(2)(v) and (vi), and adding
in its place Instructions 1, 2, and 3 to Item 402(n)(2)(v) and (vi)
before paragraph (n)(2)(vii);
0
k. Revising paragraph (n)(2)(ix)(G);
0
l. Revising paragraphs (r)(2)(iii), (r)(2)(iv) and (r)(2)(vii)(I), and
Instruction to Item 402(r); and
0
m. Adding paragraph (s) before the Instruction to Item 402.
    The revisions and additions read as follows:

Sec.  229.402  (Item 402) Executive compensation.

* * * * *
    (c) * * *
    (2) * * *
    (v) For awards of stock, the aggregate grant date fair value
computed in accordance with FASB ASC Topic 718 (column (e));
    (vi) For awards of options, with or without tandem SARs (including
awards that subsequently have been transferred), the aggregate grant
date fair value computed in accordance with FASB ASC Topic 718 (column
(f));
    Instruction 1 to Item 402(c)(2)(v) and (vi). For awards reported in
columns (e) and (f), include a footnote disclosing all assumptions made
in the valuation by reference to a discussion of those assumptions in
the registrant's financial statements, footnotes to the financial
statements, or discussion in the Management's Discussion and Analysis.
The sections so referenced are deemed part of the disclosure provided
pursuant to this Item.
    Instruction 2 to Item 402(c)(2)(v) and (vi). If at any time during
the last completed fiscal year, the registrant has adjusted or amended
the exercise price of options or SARs previously awarded to a named
executive officer, whether through amendment, cancellation or
replacement grants, or any other means (``repriced''), or otherwise has
materially modified such awards, the registrant shall include, as
awards required to be reported in column (f), the incremental fair
value, computed as of the repricing or modification date in accordance
with FASB ASC Topic 718, with respect to that repriced or modified
award.
    Instruction 3 to Item 402(c)(2)(v) and (vi). For any awards that
are subject to performance conditions, report the value at the grant
date based upon the probable outcome of such conditions. This amount
should be consistent with the estimate of aggregate compensation

cost to be recognized over the service period determined as of the
grant date under FASB ASC Topic 718, excluding the effect of estimated
forfeitures. In a footnote to the table, disclose the value of the
award at the grant date assuming that the highest level of performance
conditions will be achieved if an amount less than the maximum was
included in the table.
* * * * *
    (ix) * * *
    (G) The dollar value of any dividends or other earnings paid on
stock or option awards, when those amounts were not factored into the
grant date fair value required to be reported for the stock or option
award in column (e) or (f); and
* * * * *
    (d) * * *
    Instructions to Item 402(d).
* * * * *
    8. For any equity awards that are subject to performance
conditions, report in column (l) the value at the grant date based upon
the probable outcome of such conditions. This amount should be
consistent with the estimate of aggregate compensation cost to be
recognized over the service period determined as of the grant date
under FASB ASC Topic 718, excluding the effect of estimated
forfeitures.
* * * * *
    (k) * * *
    (2) * * *
    (iii) For awards of stock, the aggregate grant date fair value
computed in accordance with FASB ASC Topic 718 (column (c));
    (iv) For awards of options, with or without tandem SARs (including
awards that subsequently have been transferred), the aggregate grant
date fair value computed in accordance with FASB ASC Topic 718 (column
(d));
* * * * *
    (vii) * * *
    (I) The dollar value of any dividends or other earnings paid on
stock or option awards, when those amounts were not factored into the
grant date fair value required to be reported for the stock or option
award in column (c) or (d); and
* * * * *
    Instruction to Item 402(k). In addition to the Instruction to
paragraphs (k)(2)(iii) and (iv) and the Instructions to paragraph
(k)(2)(vii) of this Item, the following apply equally to paragraph (k)
of this Item: Instructions 2 and 4 to paragraph (c) of this Item;
Instructions to paragraphs (c)(2)(iii) and (iv) of this Item;
Instructions to paragraphs (c)(2)(v) and (vi) of this Item;
Instructions to paragraph (c)(2)(vii) of this Item; Instructions to
paragraph (c)(2)(viii) of this Item; and Instructions 1 and 5 to
paragraph (c)(2)(ix) of this Item. These Instructions apply to the
columns in the Director Compensation Table that are analogous to the
columns in the Summary Compensation Table to which they refer and to
disclosures under paragraph (k) of this Item that correspond to
analogous disclosures provided for in paragraph (c) of this Item to
which they refer.
* * * * *
    (n) * * *
    (2) * * *
    (v) For awards of stock, the aggregate grant date fair value
computed in accordance with FASB ASC Topic 718 (column (e));
    (vi) For awards of options, with or without tandem SARs (including
awards that subsequently have been transferred), the aggregate grant
date fair value computed in accordance with FASB ASC Topic 718 (column
(f));
    Instruction 1 to Item 402(n)(2)(v) and (n)(2)(vi). For awards
reported in columns (e) and (f), include a footnote disclosing all
assumptions made in the valuation by reference to a discussion of those
assumptions in the smaller reporting company's financial statements,
footnotes to the financial statements, or discussion in the
Management's Discussion and Analysis. The sections so referenced are
deemed part of the disclosure provided pursuant to this Item.
    Instruction 2 to Item 402(n)(2)(v) and (n)(2)(vi). If at any time
during the last completed fiscal year, the smaller reporting company
has adjusted or amended the exercise price of options or SARs
previously awarded to a named executive officer, whether through
amendment, cancellation or replacement grants, or any other means
(``repriced''), or otherwise has materially modified such awards, the
smaller reporting company shall include, as awards required to be
reported in column (f), the incremental fair value, computed as of the
repricing or modification date in accordance with FASB ASC Topic 718,
with respect to that repriced or modified award.
    Instruction 3 to Item 402(n)(2)(v) and (vi). For any awards that
are subject to performance conditions, report the value at the grant
date based upon the probable outcome of such conditions. This amount
should be consistent with the estimate of aggregate compensation cost
to be recognized over the service period determined as of the grant
date under FASB ASC Topic 718, excluding the effect of estimated
forfeitures. In a footnote to the table, disclose the value of the
award at the grant date assuming that the highest level of performance
conditions will be achieved if an amount less than the maximum was
included in the table.
* * * * *
    (ix) * * *
    (G) The dollar value of any dividends or other earnings paid on
stock or option awards, when those amounts were not factored into the
grant date fair value required to be reported for the stock or option
award in column (e) or (f); and
* * * * *
    (r) * * *
    (2) * * *
    (iii) For awards of stock, the aggregate grant date fair value
computed in accordance with FASB ASC Topic 718 (column (c));
    (iv) For awards of options, with or without tandem SARs (including
awards that subsequently have been transferred), the aggregate grant
date fair value computed in accordance with FASB ASC Topic 718 (column
(d));
* * * * *
    (vii) * * *
    (I) The dollar value of any dividends or other earnings paid on
stock or option awards, when those amounts were not factored into the
grant date fair value required to be reported for the stock or option
award in column (c) or (d); and
* * * * *
    Instruction to Item 402(r). In addition to the Instruction to
paragraph (r)(2)(vii) of this Item, the following apply equally to
paragraph (r) of this Item: Instructions 2 and 4 to paragraph (n) of
this Item; the Instructions to paragraphs (n)(2)(iii) and (iv) of this
Item; the Instructions to paragraphs (n)(2)(v) and (vi) of this Item;
the Instructions to paragraph (n)(2)(vii) of this Item; the Instruction
to paragraph (n)(2)(viii) of this Item; the Instructions to paragraph
(n)(2)(ix) of this Item; and paragraph (o)(7) of this Item. These
Instructions apply to the columns in the Director Compensation Table
that are analogous to the columns in the Summary Compensation Table to
which they refer and to disclosures under paragraph (r) of this Item
that correspond to analogous disclosures provided for in paragraph (n)
of this Item to which they refer.
* * * * *
    (s) Narrative disclosure of the registrant's compensation policies
and practices as they relate to the registrant's risk management. To
the extent that risks arising from the registrant's compensation
policies and practices for its employees are

reasonably likely to have a material adverse effect on the registrant,
discuss the registrant's policies and practices of compensating its
employees, including non-executive officers, as they relate to risk
management practices and risk-taking incentives. While the situations
requiring disclosure will vary depending on the particular registrant
and compensation policies and practices, situations that may trigger
disclosure include, among others, compensation policies and practices:
at a business unit of the company that carries a significant portion of
the registrant's risk profile; at a business unit with compensation
structured significantly differently than other units within the
registrant; at a business unit that is significantly more profitable
than others within the registrant; at a business unit where
compensation expense is a significant percentage of the unit's
revenues; and that vary significantly from the overall risk and reward
structure of the registrant, such as when bonuses are awarded upon
accomplishment of a task, while the income and risk to the registrant
from the task extend over a significantly longer period of time. The
purpose of this paragraph(s) is to provide investors material
information concerning how the registrant compensates and incentivizes
its employees that may create risks that are reasonably likely to have
a material adverse effect on the registrant. While the information to
be disclosed pursuant to this paragraph(s) will vary depending upon the
nature of the registrant's business and the compensation approach, the
following are examples of the issues that the registrant may need to
address for the business units or employees discussed:
    (1) The general design philosophy of the registrant's compensation
policies and practices for employees whose behavior would be most
affected by the incentives established by the policies and practices,
as such policies and practices relate to or affect risk taking by
employees on behalf of the registrant, and the manner of their
implementation;
    (2) The registrant's risk assessment or incentive considerations,
if any, in structuring its compensation policies and practices or in
awarding and paying compensation;
    (3) How the registrant's compensation policies and practices relate
to the realization of risks resulting from the actions of employees in
both the short term and the long term, such as through policies
requiring claw backs or imposing holding periods;
    (4) The registrant's policies regarding adjustments to its
compensation policies and practices to address changes in its risk
profile;
    (5) Material adjustments the registrant has made to its
compensation policies and practices as a result of changes in its risk
profile; and
    (6) The extent to which the registrant monitors its compensation
policies and practices to determine whether its risk management
objectives are being met with respect to incentivizing its employees.
* * * * *

0
4. Amend Sec.  229.407 by:
0
a. Revising paragraph (c)(2)(vi);
0
b. Revising paragraph (e)(3)(iii); and
0
c. Adding paragraph (h) before the Instructions to Item 407.
    The revisions and additions read as follows:

Sec.  229.407  (Item 407) Corporate governance.

* * * * *
    (c) * * *
    (2) * * *
    (vi) Describe the nominating committee's process for identifying
and evaluating nominees for director, including nominees recommended by
security holders, and any differences in the manner in which the
nominating committee evaluates nominees for director based on whether
the nominee is recommended by a security holder, and whether, and if so
how, the nominating committee (or the board) considers diversity in
identifying nominees for director. If the nominating committee (or the
board) has a policy with regard to the consideration of diversity in
identifying director nominees, describe how this policy is implemented,
as well as how the nominating committee (or the board) assesses the
effectiveness of its policy;
* * * * *
    (e) * * *
    (3) * * *
    (iii) Any role of compensation consultants in determining or
recommending the amount or form of executive and director compensation
(other than any role limited to consulting on any broad-based plan that
does not discriminate in scope, terms, or operation, in favor of
executive officers or directors of the registrant, and that is
available generally to all salaried employees; or providing information
that either is not customized for a particular registrant or that is
customized based on parameters that are not developed by the
compensation consultant, and about which the compensation consultant
does not provide advice) during the registrant's last completed fiscal
year, identifying such consultants, stating whether such consultants
were engaged directly by the compensation committee (or persons
performing the equivalent functions) or any other person, describing
the nature and scope of their assignment, and the material elements of
the instructions or directions given to the consultants with respect to
the performance of their duties under the engagement:
    (A) If such compensation consultant was engaged by the compensation
committee (or persons performing the equivalent functions) to provide
advice or recommendations on the amount or form of executive and
director compensation (other than any role limited to consulting on any
broad-based plan that does not discriminate in scope, terms, or
operation, in favor of executive officers or directors of the
registrant, and that is available generally to all salaried employees;
or providing information that either is not customized for a particular
registrant or that is customized based on parameters that are not
developed by the compensation consultant, and about which the
compensation consultant does not provide advice) and the compensation
consultant or its affiliates also provided additional services to the
registrant or its affiliates in an amount in excess of $120,000 during
the registrant's last completed fiscal year, then disclose the
aggregate fees for determining or recommending the amount or form of
executive and director compensation and the aggregate fees for such
additional services. Disclose whether the decision to engage the
compensation consultant or its affiliates for these other services was
made, or recommended, by management, and whether the compensation
committee or the board approved such other services of the compensation
consultant or its affiliates.
    (B) If the compensation committee (or persons performing the
equivalent functions) has not engaged a compensation consultant, but
management has engaged a compensation consultant to provide advice or
recommendations on the amount or form of executive and director
compensation (other than any role limited to consulting on any broad-
based plan that does not discriminate in scope, terms, or operation, in
favor of executive officers or directors of the registrant, and that is
available generally to all salaried employees; or providing information
that either is not customized for a particular registrant or that is
customized based on parameters that are not developed by the
compensation consultant, and about which the compensation consultant

does not provide advice) and such compensation consultant or its
affiliates has provided additional services to the registrant in an
amount in excess of $120,000 during the registrant's last completed
fiscal year, then disclose the aggregate fees for determining or
recommending the amount or form of executive and director compensation
and the aggregate fees for any additional services provided by the
compensation consultant or its affiliates.
* * * * *
    (h) Board leadership structure and role in risk oversight. Briefly
describe the leadership structure of the registrant's board, such as
whether the same person serves as both principal executive officer and
chairman of the board, or whether two individuals serve in those
positions, and, in the case of a registrant that is an investment
company, whether the chairman of the board is an ``interested person''
of the registrant as defined in section 2(a)(19) of the Investment
Company Act (15 U.S.C. 80a-2(a)(19)). If one person serves as both
principal executive officer and chairman of the board, or if the
chairman of the board of a registrant that is an investment company is
an ``interested person'' of the registrant, disclose whether the
registrant has a lead independent director and what specific role the
lead independent director plays in the leadership of the board. This
disclosure should indicate why the registrant has determined that its
leadership structure is appropriate given the specific characteristics
or circumstances of the registrant. In addition, disclose the extent of
the board's role in the risk oversight of the registrant, such as how
the board administers its oversight function, and the effect that this
has on the board's leadership structure.
* * * * *

PART 239--FORMS PRESCRIBED UNDER THE SECURITIES ACT OF 1933

0
5. The authority citation for Part 239 continues to read in part as
follows:

    Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s, 77z-2, 77z-3,
77sss, 78c, 78l, 78m, 78n, 78o(d), 78u-5, 78w(a), 78ll, 78mm, 80a-
2(a), 80a-3, 80a-8, 80a-9, 80a-10, 80a-13, 80a-24, 80a-26, 80a-29,
80a-30, and 80a-37, unless otherwise noted.
* * * * *

PART 240--GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF
1934

0
6. The authority citation for Part 240 is revised to read as follows:

    Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3,
77eee, 77ggg, 77nnn, 77sss, 77ttt, 78c, 78d, 78e, 78f, 78g, 78i,