Corporate & Securities Law

Lisa Fairfax on Say on Pay

By Stephen Bainbridge

Lisa Fairfax reviews where we stand on say on pay:

According to riskmetrics’ most recent proxy report, by the first half of the 2007 proxy season, some 41 say on pay proposals had gone to vote, averaging about 42% shareholder support, and seven proposals received majority support.  Moreover, as of January of 2008, some 90 proposals have been submitted calling for a say on pay, while at least three companies have agreed to provide an advisory vote on compensation.  Riskmetrics says all of these figures are remarkably high given the relative newness of the issue.  In fact, Riskmetrics compared them to similar figures in the context of majority voting—which, after considerable activism, many agree now has become the norm in most major corporations.  And like majority voting, the say on pay campaign is getting help from legislators.  Indeed, the House passed legislation that would give shareholders an advisory vote on compensation and a similar bill was introduced in the Senate. ...

To be sure, one of the primary criticisms of almost all measures aimed at increasing shareholder power is that such an increase will improperly shift the balance of power, while placing such power in the hands of a small number of shareholders whose interests do not necessarily align with the broader shareholder class.  It is a criticism that has some merit.  However, most people seem to agree, albeit sometimes reluctantly, that the current balance of power has produced undesirable results, particularly with regard to compensation.  So for now, I am willing to wait and see where the say on pay movement takes us.

For a short piece by yours truly opposing legislative say on pay proposals, go here.

Full post as published by BusinessAssociationsBlog.com on February 07, 2008 (boomark / email).