13 Apr. 2010 | Comments (0)
- Say on Pay with Teeth: Important New Provision in Senate Finance Reform Bill, Eric W. Hilfers, The Tally Sheet, Boardmember.com, April 8, 2010. www.boardmember.com/blogIndividual.aspx?blogid=474. Summary: Putting it all together, the Dodd bill may create a situation where companies will face much greater pressure to bow to ISS’s compensation policies, or else risk losing a say on pay vote (thanks to the new broker voting rules) and then risk losing their director elections thanks to majority voting. The more general point is that mandatory say on pay, standing alone, is not necessarily a game changer. The Dodd bill may, however, make say on pay something much more problematic, with its combination of majority voting for directors and broker voting rules.
- A Closer Look at Dodd Bill’s Governance Provisions, Stephen Davis and Jon Lukomnik, Compliance Week, April 6, 2010. www.complianceweek.com/article/5878/a-closer-look-at-dodd-bills-governance-provisions (subscription required). Summary: Shareholder advisory votes on the compensation committee report are already standard in many markets around the world. They have been adopted on a company-by-company basis here in the United States for several years and were required for the 400 or so corporations covered by the various federal financial sector emergency relief programs. Clearly investors are campaigning boardroom by boardroom to install say-on-pay.
- Boards’ Response to Shareholders’ Dissatisfaction: The Case of Shareholders’ Say on Pay in the UK, Walid M. Alissa, Smeal College of Business, The Pennsylvania State University, May 2009, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1412880. Summary: In the United Kingdom, a recently adopted regulation provides shareholders the opportunity to cast non-binding (advisory) votes on firms’ compensation reports during annual meetings. This study of a regulation in the UK that allows shareholders to cast non-binding votes on compensation reports examines how the regulation affected the behavior of shareholders and boards. The author finds evidence that shareholders use the vote to convey their dissatisfaction with excessive executive compensation practices and reduce the excessiveness of certain CEOs’ compensation or forcing them out of office.
- Giving Shareholders a Say on Pay: A Measure Leading to Better Governance, Yvan Allaire , Institute for Governance of Private and Public Organizations (IGOPP), Quebec, Canada, March 8, 2010. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1580071. Summary: Measures that would institute a Say on Pay will likely be adopted by U.S. politicians, who appear to regard them as a panacea cure against the compensation abuses that were seen in the financial sector, or failing that, as an astute political move that would appease popular anger by providing the impression of major changes. However, the results of empirical research regarding the efficiency of such initiatives are ambiguous. Say on Pay has made shareholders more sensitive to issues of executive compensation. It should have brought about more moderation and rigor in the setting of compensation. Yet, the implementation of consultative votes did not prevent the compensation of British senior executives from rising by more than 70 percent between the time it came into effect in 2002, and 2007.