Academic

Given the modest takeup rate on the UK's say on pay (the nonbinding vote of shareholders on corporate compensation), I'm not sure that many people expected much action from its American variant.  But, to extrapolate wildly from the two failed votes held so far, it is possible that say on pay could amount to noes from the shareholders as much as 10% of the time.  We'll outsource to Broc Romanek:

Say-on-Pay: A Second Failed Vote in the First Two Weeks of Annual Meetings!

Yesterday, Beazer Homes USA filed this Item 5.07 Form 8-K which revealed that it has become the second company to fail to receive majority support for its say-on-pay, with 54% voting "against." As I blogged before, Jacobs Engineering became the first last week. That's two failed votes out of roughly 30 SOPs voted upon so far - nearly a 7% rate.

In my poll last week - in which folks guessed how many failed votes there would be this year - zero picked 1-2 failures; 4% predicted 3-4 failures; 18% predicted 5-10 failures and 75% predicted more than 10 failures (5% said "what me worry?"). At the current 7% rate of failure, it looks like the smart money will have pegged it.

I've been amused by some who have recently reported that only 1 out of 20 have failed so far - as if a 5% failure rate was a good thing - and that's not even counting the companies who have garnered a significant "against" vote like Monsanto and Johnson Controls. If you apply that failure rate to the number of companies that will hold SOP votes soon enough, the image is scary.

As Paul Hodgson blogged last year, 500 nays-on-pay would be the result extrapolating from the 3 failures last year out of the 60 companies that voluntarily had say-on-pay on their ballot. And as Paul noted, "Can you imagine what might happen if shareholders got organized? [FX: Long, slow, whistle on descending note....]"

Interestingly, a member brought three smaller companies to my attention that filed proxy materials after the effective date of Dodd-Frank's SOP provision - but before the SEC postponed the applicability of SOP to smaller reporting companies. Given that the SEC hadn't signaled the postponement beforehand, they certainly got lucky! Of course, given that they didn't even know that SOP had applied to them, they likely don't even know they are lucky...