State Regulation of Executive Compensation

In addition to federal laws and regulations, companies must also be aware of various efforts by state governments to regulate executive compensation. Up until the financial meltdown of 2008, there had not been much effort by states to regulate the executive compensation of public, for-profit corporations directly. However, since 2008 several states, most notably California and New York, have introduced legislation aimed at regulating executive compensation for companies doing business in their respective states. These initiatives have taken different approaches to limiting executive compensation. The ultimately unsuccessful California efforts would have required extensive and new disclosures from companies, including compensation disclosures for retired executives. The New York legislation, which has been signed into law and is currently being implemented, places direct limitations on the amount of executive compensation for certain state-funded organizations, including companies with large state contracts. Given their current economic situations, many states are looking for ways to raise revenue, and it will be important for companies to monitor state regulation of executive compensation.