Regis Corp shareowners overwhelming selected Starboard Value’s slate of three directors at the company’s recent annual meeting and they rejected management’s “say-on-pay proposal,” with 72% voting against.
According to Equilar, which tracks compensation data, Regis becomes just the 43rd company out of more than 2,982 shareholder votes this year to reject management’s compensation proposals.
Starboard Value’s pitch to shareholders went in depth on the “destruction” of shareholder value, weak financial performance and also excessive executive compensation. In a presentation to shareholders, Starboard highlighted that former CEO Paul Finkelstein collected more than $15 million in compensation from 2008 to 2010 while the share price declined 30 percent; his retirement benefits entitle him to a minimum of $800,000 per year for the rest of his life and he is entitled to $2.75 million transition payment upon the appointment of a new CEO.
Other companies where say-on-pay votes failed include Cincinnati Bell, HP, Nutrisystem, Nabors, Janus Capital Group Inc., Talbots Inc. and Stanley Black & Decker Inc. The average negative vote at the 42 other companies was about 57 percent. Previously the most decisive vote against a say-on-pay proposal was at Cincinnati Bell, where 70 percent of shareholders voted against the measure. (Inside Track: Say-on-pay vote puts Regis on notice, Star Tribune, 11/7/2011)
If I were looking to targets for shareowner lawsuits or proxy access proposals, such companies… and possibly the big Wall Street banks, might top my list. Even with additional focus by compensation committees this coming proxy season, I expect the rate of rejections to climb. Last year, many investors gave companies a pass, while taking a wait and see approach. This year, they are likely to take a more aggressive approach.
I’m hoping many retail shareowners and some institutional investors adopt an approach that tries to address the continuous ratcheting up of pay due to the “Lake Woebegone Effect,” where all CEOs are above average. See the USPX’s Shareowner Guidelines For Say-On-Pay Voting.
The Media is No Friend of Corporate Directors, writes T.K. Kerstetter. That’s right, and it is time boards took action to avoid giving shareowners good reason to vote no.