Tag Archives | say on pay

Apple: My "Say on Director Pay" Proposal & How I'm Voting

Apple (AAPL) is one of the stocks in my portfolio. Their annual meeting is coming up on February 23, 2012 (Thursday). This is one meeting I’ll be attending in person, both to vote and to move my motion to provide shareowners with a “say on directors pay.”

When I last looked, MoxyVote.com had recommendations from twelve “good causes.”  ProxyDemocracy.org had four participating funds voting. Continue Reading →

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72% Voted No at Regis: More to Follow

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 Continue Reading →

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Two Opportunities to Shape the Future

First, the IRRC Deadline of November 18 for Research Entries approaches. This is your chance to change the predominant paradigm of Modern Portfolio Theory.

Second, Institutional Shareholder Services Inc. (ISS) extended the comment period on their 2012 proxy voting policies until November 7th.  Institutional investors, individual investors, corporate issuers, and governance market participants are invited to provide feedback on ISS’ policy updates.  ISS did a specific outreach to CorpGov.net readers, so I Continue Reading →

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Say on Pay May Lead to Closer Examination of Deductability

Don’t ignore the Wall Street protesters (Investment News, 10/17/2011)

Unlikely as it is that the Occupy Wall Street agenda (whatever that turns out to be) will be adopted wholesale by Congress, advisers can be sure that the group’s intensive illumination of stratospheric executive compensation and bank bailouts will translate into a public mood more conducive to higher taxes on the wealthy.

I’m betting that we will see many more suits like the following after the next say on pay round of votes, especially if Occupy Wall Street is still going strong. #OWS

From Jim Hamilton’s World of Securities Regulation, Shareholder Could Proceed with Derivative Claim that Proxy Statement Misled on Continue Reading →

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Pay Ratios and Ratcheting

Daniel F. Pedrotty, AFL-CIO, posted Why CEO-to-Worker Pay Ratios Matter to Investors to the Harvard Law School Forum on Corporate Governance and Financial Regulations on Thursday August 11. I’ve been meaning to mention it since then, mostly so that I have it file on my blog for future reference. I’ve got almost 16 years of corporate governance history on my blog (and more from my old site on my laptop, still waiting to migrate). This is one document I think people will be coming back to in the future.

Pedrotty’s post references Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which requires public companies to disclose the ratio of Continue Reading →

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Video Friday: Exec Pay, Balancing Expectations or Class Warfare?

Scott Cutler, EVP, NYSE Euronext, interviewed Linda Lamel, Compensation Chair, Universal American Financial Corp. for This Week in the Boardroom (video) 9/29/2011.

See also the AFL-CIO’s PayWatch and the Young Turks video. In 2010 the average worker saw a 2.6% increase in salary but a 3.6% increase in the Consumer Price Index. Meanwhile median CEO pay increased 27%.

The emergence of an oligarchy in this country will undermine our place in the world and ultimately our historic form of capitalism, which, in the past, was the route to the middle class for hundreds of millions of hardworking Americans.

The latest evidence of this struggle is the report from the Institute for Policy Studies which found that of America’s 100 highest-payed CEOs, 25 took home more in pay than their companies paid in federal taxes.CEO Pay: Class Warfare, Behind the (New York) Times, 9/2/2011.

Here’s the ISS 2011 US Compensation Policy. Want to see CEO pay stop soaring? Use the Shareowner Guidelines For Say-On-Pay Voting, issued by the United States Proxy Exchange.

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Will 2011 be a Watershed Year for Activism?

2011 was the first proxy season in which companies were required to provide advisory votes on executive compensation. Corporate governance advocates, mindful of the fact that annual compensation for CEOs at S&P 500 companies increased by 35% in 2010, might well find themselves agreeing with James McRitchie of CorpGov.net, who told SocialFunds.com in June, “2011 could be a watershed year if next year people look back and wonder why the hell they didn’t do anything.”

…board declassification, a majority voting standard, an independent board chair, and reporting on political spending, received more than Continue Reading →

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The Potentially Binding Nature of Say on Pay

Say-on-pay, somewhat hollow on its own, could be used as a gatekeeper of sorts for corporate waste claims, argues Steven C. Caywood in Wasting the Corporate Waste Doctrine: How the Doctrine Can Provide a Viable Solution in Controlling Excessive Executive Compensation, 12/2010. A revitalized corporate waste doctrine would allow shareowners to have some meaningful power as a safeguard against a board of directors that excessively compensates executives. Using these two tools in tandem would allow shareowners to address executive compensation concerns while not overburdening corporations with regulation and litigation.

A waste claim is a relatively simple one. It is brought by shareholders against a company’s board of directors alleging that the board wasted company assets. Waste can include any distribution of company assets, but the doctrine, when Continue Reading →

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Say-on-Pay Voting Standards Released

Yesterday, the United States Proxy Exchange (USPX) released standards for shareowners to use in making say-on-pay voting decisions.  “Say-on-pay” rules mandated by Dodd-Frank allow shareowners to express an opinion on executive compensation at annual meetings. But to make informed voting decisions, shareowners must first assess the compensation packages boards propose. That is not easy, since they tend to be very complex. Even sophisticated business professionals have a difficult time evaluating them, so how can average shareowners hope to do so?

This is not an idle issue. In the 2011 proxy season, institutional investors acted with breathtaking irresponsibility, collectively approving 98.3% of compensation packages. They did this as executive compensation continues to skyrocket. In 1965, CEO pay at large companies was 24 times the average worker’s wages. In 2010, that ratio was a staggering 343 to 1. Responding to the irresponsibility of institutional investors, John Harrington of Harrington Investments commented:

… if fiduciary duty, including ERISA, were truly enforced, lots of trustees, directors, administrators and managers would be in jail.

If shareowners — individual investors as well as small, medium and large institutional investors — do not start voting down the majority of compensation packages, we will have become part of the problem with executive compensation. A simple approach would be to vote against all executive compensation packages, but that would be self-defeating. If boards know compensation packages will be voted down no matter what they contain, they will have no incentive to make changes. Since say-on-pay votes are advisory, they would have no impact.

The USPX guidelines propose easy ways shareowners can review firms’ compensation packages and make reasonable say-on-pay voting decisions. The guidelines are predicated on the belief that some levels of compensation are so outlandish as to be unreasonable irrespective of a firm’s or CEO’s performance. The guidelines assist shareowners in deciding how and where to draw that line.

On November 11, 2010, the USPX released draft guidelines. We received many comments and we made several modest changes prompted by the feedback we received. Drafting the guidelines has been difficult. We have had to balance the inherent complexity of the compensation issue with the need for guidelines that are both simple and relevant.

The current guidelines apply only for compensation at large corporations. (Although during the 2011 season, I have been extending the logic of the Guidelines to small and medium corporations as well by voting down pay where NEO’s received more than median pay last year.) In future releases, we hope to extend the guidelines to small and medium corporations with more precise algorithms. In the mean time, we encourage shareowners to experiment with the guidelines and provide us with feedback on your own application and/or variation of our methodology. Please post feedback directly on the USPX website. Again, here is a direct link to the guidelines.

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Video Friday: Say-On-Pay Lawsuits, Crazy? + Daily Show Bonus

This Week in the Boardroom: 7/14/11 TK Kerstetter, President, Corporate Board Member; Scott Cutler, Executive Vice President, NYSE Euronext; and Stephen Lamb, Partner, Paul Weiss discuss the fact that losing a say-on-pay vote increases the likelihood of a shareowner lawsuit. See also Frivolous Say on Pay Lawsuits: Another Unintended Consequence.

This seems like a no-brainer to me. Over 98% of company say on pay votes passed. Isn’t it highly likely that those that fail such votes are more likely to be targeted? I think it is difficult for any company to truly show a direct link between CEO pay and performance. For those companies where Continue Reading →

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ISS Vote Results and Executive Pay

ISS released a summary of the vote results for shareholder proposals on leading governance, environmental and social topics. Investors overwhelmingly endorsed company pay programs, 91.2% support on average (based on “for” and “against” votes). Shareholders voted down management “say on pay” proposals at 36 companies, or just 1.7 percent of the almost 2,200 companies in the Russell Continue Reading →

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Executive Compensation: Its Complicated

Andrew Liazos, writing for CFO magazine, argues that a law enacted years ago in response to Enron poses new tax risk for deferred compensation in that Section 409A could inhibit desirable restructuring of executive pay in response to possible “say on pay” no votes.

A 2009 notice from the IRS granted special relief to TARP recipients, stating:

the application of 409A(a) in these circumstances would produce a disincentive for TARP recipients to comply with the Special Master’s advisory opinions and act in accordance with the public interest, severely diminishing the Special Master’s ability to fulfill his intended role and damaging the entire TARP program.

However, no such relief has been granted to other companies now that say on pay is Continue Reading →

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CEO Compensation Rose Sharply in 2010

In the aftermath of last year’s passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act and its requirement that public companies hold shareowner votes on executive compensation in 2011, many sustainable investors and other shareowner activists anticipated that this year’s proxy season could result in a watershed year for corporate governance. As Lisa Woll, CEO of the Social Investment Forum (SIF) said following the bill’s passage, “The most recent financial crisis highlighted for all Americans the urgent need to instill greater discipline among corporate boards and in financial markets…say on pay will help address these failures and strengthen America’s financial markets.”

via Institutional Shareowner, 6/10/2011. I’m on my way to the Yale Governance Forum so no time to blog. (Follow the conference on Twitter at #YaleGovForum. See my Continue Reading →

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Stock-based Comp Dis-aligns Shareowners & Mgt

Writing in the Harvard Business Review, Roger Martin from U. of Toronto explains that CEOs are rewarded for share price volatility not performance. (The Nasty Truth about CEO Pay, 6/3/2011) The financial crisis worked out great for them. Martin explains with great tables comparing the returns for a CEO, whose company performed with the averages, vs one that was able to steer through the storm.

Who is the more valuable CEO? Whose compensation should be higher? Should it be Thrill-a-Minute Tom, who saw massive volatility and a net loss of 6% over the period? Or should it be Steady Eddie, who avoided ups and down, protected investors’ capital Continue Reading →

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Video Friday: 2011 Proxy Season to Date

This Week in the Boardroom‘s TK Kerstetter and Scott Cutler were joined on May 26 by John Siemann, President of Phoenix Advisory Partners. (Watch the video.)

Early proxy filings were tilted towards the triennial. Very quickly, that began to as proxy advisory services and larger institutions made it clear they wanted an annual vote.

ISS recommended against the pay packages at about 16% of companies they analyze that Continue Reading →

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Davita (DVA): How I Voted

Davita (DVA) is one of the stocks in my portfolio. Their annual meeting is coming up June 6. ProxyDemocracy.org had four funds voting. MoxyVote.com had two funds and two consolidations.

Checking the Summary Compensation Table, it appears CEO/Chair Kent J. Thiry was paid more than $14 million. Using the United States Proxy Exchange (USPX) released draft guidelines, I voted against most pay packages over the median for large- Continue Reading →

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Cognizant (CTSH): How I Voted

Cognizant Technology Solutions (CTSH) is one of the stocks in my portfolio. Their annual meeting is coming up June 2. ProxyDemocracy.org had four funds voting when I looked yesterday.

Checking the Summary Compensation Table, it appears CEO/Chairman Francisco D’Souza was paid more than $11 million.  Using the United States Proxy Exchange (USPX) released draft guidelines, I voted against most pay packages where the company paid more than the median $9 million last year, including this one. I also voted against Robert E. Weissman, the member of the compensation committee up for election this year and the proposal to increase authorized stock.

I voted for a pay advisory every year, instead of management’s recommended every three years but in favor of the other management proposals.

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Biogen Idec (BIIB): How I Voted

Biogen Idec (BIIB) is one of the stocks in my portfolio. Their annual meeting is coming up June 2. ProxyDemocracy.org had five funds voting.

Checking the Summary Compensation Table, it appears former CEO/Chairman James C. Mullen was paid more than $20 million and current CEO George A. Scangos was paid $9.4 million.  Using the United States Proxy Exchange (USPX) released draft guidelines, I voted against most pay packages where the company paid more than the median $9 million last year. I also voted against Robert W. Pangia (Chair), Alexander J. Denner, Eric K. Rowinsky, and Lynn Schenk, since they served on the compensation committee.  I voted for a pay advisory every year and in favor of declassifying the board, a management proposal.

The 2011 Annual Shareholder Meeting will be webcast live on Thursday, June 2, 2011 at 9:00 a.m. ET. To access the live webcast, please visit Biogen Idec’s Investor Relations section (investor.biogenidec.com). An archived version of the webcast will be available following the meeting.

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Executive Pay

Pay continues to be the biggest issue this proxy season. The May 17 edition of Pirc Alert had several articles on point. In “A challenge to high pay” they discuss some of the findings by the High Pay Commission. Here’s a few choice tidbits from the Commission’s report:

  • attempts to link top pay with company performance only seem to have resulted in pushing up remuneration, with little corresponding step up in business success.
  • the top 0.1% earners – are finance workers (30%), those working in business (38%) and company directors (34%)
  • Excessive rewards are undermining relationships with employees and shareholders; they are encouraging harmful risk taking and creating an economic elite which wields enormous power but appears to have lost touch with how the rest of us live.
  • Defenders of high pay talk about executives being poached by international competitors but only one FTSE 100 company has been the victim of poaching in the last 5 years, that was from another British firm.
  • a feeling that business leaders are ‘in it for themselves’ pervades all discussions on the behaviour of businesses.
  • 58% of people either agree or strongly agree there is one rule for the rich and another for the poor; 18% disagree
  • The failure of our corporate governance system means that we are now paying more and getting less

The Commission will now look at options, such as “reforms of the Remuneration Committees and the inclusion of other stakeholders.” PIRC has also argued that introducing dissident elements onto committees may restrict excess. We look forward to the Commission’s recommendations later this year.

Yesterday Broc Romanek reported “four more companies filed Form 8-Ks reporting failed say-on-pay votes: Helix Energy Solutions (34%); Curtiss-Wright (41%); Intersil (44%); and Cincinnati Bell (34%). I keep maintaining our list of Form 8-Ks for failed SOPs in CompensationStandards.com’s “Say-on-Pay” Practice Area.”  His list was up to 24 when I looked yesterday; it could be higher today. See the agenda for their upcoming November 1 conference.

Thanks in part to “say on pay,” U.S. directors are receiving less opposition from investors this season. As of May 12, the average “withhold” vote was 4.7 percent, as compared with 5.5 percent last year. At S&P 500 companies, the average opposition rate has fallen from 4.1 percent in 2010 to 3.9 percent this year, according to ISS data. (Advisory Votes Help Shield Directors From Investor Dissent, Ted Allen, ISS, 5/19/2011)

The United States Proxy Exchange (USPX) released draft guidelines for shareowners to use in making say-on-pay voting decisions. Our guidelines call for a no vote on “say-on-pay” when the ratio of CEO pay to average workers exceeded a shareowner specified threshold or when the CEO was higher than the median. We also recommend voting against compensation committee members when shareowners vote down pay packages.

Is this a good strategy, or should we wait until the following year to vote out compensation members who don’t take voting down pay packages seriously? That seems to be the strategy of many shareowners this year. What are your ideas on how to ratchet down pay packages that seem to rise every year, regardless of company performance and oblivious to the widening gap between the super-rich and the rest of us?

Comment letters are due by June 2nd to [email protected]. Please put “Say-on-Pay Guidelines” in the e-mail subject line. Letters will be posted to the USPX website, unless you indicate you would rather remain anonymous.

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Interface: How I Voted

Interface, Inc (IFSIA) is one of the stocks in my portfolio. Their annual meeting is coming up May 23. ProxyDemocracy.org had only one fund voting, CBIS, when I looked yesterday. Often they seem to vote against just about every management recommendation but not this time. MoxyVote.com had five opinions but only two readily identifiable sources, Calvert and Trillium. They were at odds with each other.

Checking the Summary Compensation Table, it appears CEO/Daniel T. Hendrix was paid Continue Reading →

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