Release No. 33-8732A Release No. 34-54302A Release No. IC-27444A

Securities and Exchange Commission

Executive Compensation and Related Person Disclosure
Section V.

V. Certain Relationships and Related Transactions Disclosure

As we explained in the Proposing Release, we believe that, in addition to disclosure regarding executive compensation, a materially complete picture of financial relationships with a company involves disclosure regarding related party transactions. Therefore, we are also adopting significant revisions to Item 404 of Regulation S-K, previously titled Certain Relationships and Related Transactions. In 1982, various provisions that had been adopted in a piecemeal fashion and had been subject to frequent amendment were consolidated into Item 404 of Regulation S-K.⁴⁰⁸ Today we are amending Item 404 of Regulation S-K and S-B to streamline and modernize this disclosure requirement, while making it more principles-based. Although the amendments significantly modify this disclosure requirement, its purpose - to elicit disclosure regarding transactions and relationships, including indebtedness, involving the company and related persons and the independence of directors and nominees for director and the interests of management - remains unchanged.

As discussed in greater detail below, the amendments have four parts:⁴⁰⁹

• Item 404(a)(5) contains a general disclosure requirement for related person transactions, including those involving indebtedness.
• Item 404(b) requires disclosure regarding the companys policies and procedures for the review, approval or ratification of related person transactions.
• Item 404(c) requires disclosure regarding promoters and certain control persons of a company.⁴¹⁰
• Item 407 consolidates corporate governance disclosure requirements.⁴¹¹ Also, Item 407(a) requires disclosure regarding the independence of directors, including whether each director and nominee for director of the company is independent, as well as a description by specific category or type of any transactions, relationships or arrangements not disclosed under paragraph (a) of Item 404 that were considered when determining whether each director and nominee for director is independent.

⁴⁰⁸ See the 1982 Release. For a discussion of these provisions, see also Disclosure of Certain Relationships and Transactions Involving Management, Release No. 33-6416 (July 9, 1982) [47 FR 31394], at Section II.

⁴⁰⁹ The discussion that follows focuses on changes to Regulation S-K, with Section V.E.1. explaining the modifications to Regulation S-B. References throughout the following discussion are to Items of Regulation S-K, unless otherwise indicated.

⁴¹⁰ Prior to adoption of these amendments, disclosure regarding promoters was required under Item 404(d).

⁴¹¹ These matters previously were required to be disclosed pursuant to various provisions, including Item 7 of Schedule 14A and Items 306, 401(h), (i) and (j), 402(j) and 404(b). We are eliminating as proposed the requirement for disclosure regarding specific director and director nominee relationships that had been set forth in Item 404(b) prior to todays amendments, in favor of the disclosures regarding director independence required by Item 407(a).