So far 26 U.S. companies have seen their Say on Pay ballot items rejected by shareholders.
FORBES: No Work and All Pay? Shareholders Will Have Their Say.
We are advocates of Say on Pay and were advocates long before it became mandatory under Dodd-Frank.
Yet, despite the difficulties say on pay will create, many companies will ultimately view it as beneficial.
So, where does this leave investors in deciding how to cast their Say on Pay vote?
FORBES: Who Should Investors Believe When It Comes to Peer Groups?
The intent of Say on Pay was to create ongoing communication between shareholders and boards of directors.
In other words, shareholders are taking advantage of the Frank-Dodd Act as an opportunity to have their say on pay policies.
FORBES: No Work and All Pay? Shareholders Will Have Their Say.
On May 3, NVR became the 16th U.S. listed company to see its Say on Pay vote rejected by shareholders in 2011.
FORBES: No Work and All Pay? Shareholders Will Have Their Say.
They will get what we call a say on pay, a voice with respect to the salaries and bonuses awarded to top executives.
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Perhaps driven by Dodd-Frank and Say on Pay, we are seeing a new energy around companies telling their stories from a fresh perspective.
Companies have received negative Say on Pay votes for far less.
FORBES: Citigroup Pay Reforms Fall Well Short Of The Gold Standard
Likewise, homebuilder NVR Inc. has also found itself in the spotlight after its Say on Pay ballot item was rejected by shareholders on May 3, 2011.
FORBES: No Work and All Pay? Shareholders Will Have Their Say.
Subsequently, shareholder proposals to introduce a say on pay vote received huge support, and the management say on pay vote, when it arrived, received very little.
FORBES: The Failure of U.S. Capitalism Is the Shareholders' Fault?
With Proxy Season 2011 in full swing and Say on Pay a reality, I am spending lots of time with investors and compensation committees.
Clear and proactive steps can be taken to ensure that Say on Pay becomes a useful communication platform between companies and their investors, and nothing more.
Reply: One positive step forward has been the "Say on Pay" provisions that the President proposed and signed into law as part of Wall Street Reform.
This week's developments in Europe take the debate a big step forward by giving corporate outsiders more direct say on pay levels, rather than just react to them.
But as annual general meetings grow ever more fractious bosses would do well to consider allowing shareholders, the firms' owners, to have more say on pay and other matters.
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So far in 2011, shareholders at U.S.-listed companies are taking advantage of the Say on Pay provision provided under the Dodd-Frank Act, the legislative response to the 2008 financial crisis.
FORBES: No Work and All Pay? Shareholders Will Have Their Say.
Judging Say on Pay as a waste of time, in only its second year, because shareholders have approved the vast majority of pay packages with overwhelming support, is also nonsense.
FORBES: The Failure of U.S. Capitalism Is the Shareholders' Fault?
The new federal requirement that public companies hold nonbinding shareholder votes on proposed executive compensation plans (the votes are known as "say on pay") creates considerable challenges for corporate leaders.
Those with no government capital will not face specific limits, but shareholders will have more of a say on pay, Congress willing, and regulators more leeway to alter pay policies.
First, if ISS and the company disagree on the integrity of the pay for performance relationship, and therefore, the Say on Pay vote, then investors will need to sort out why.
FORBES: Who Should Investors Believe When It Comes to Peer Groups?
The folks promoting "say on pay" may be calling you to ask for support of their proposal, while the company may be calling you to ask you to vote against it.
Citigroup, of course, lost its Say on Pay vote fairly dramatically last year, as these things go, with almost 55 percent of shareholders voting against what were deemed over-generous, and over-discretionary incentives.
FORBES: Citigroup Pay Reforms Fall Well Short Of The Gold Standard
So it can bargain directly with workers at factory level, Fiat has also decided to quit Confindustria, Italy's main employers' lobby, after it offered the unions' national chiefs a final say on pay deals.
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Problem number two is apparently Say on Pay.
FORBES: The Failure of U.S. Capitalism Is the Shareholders' Fault?
Moreover, if the relationship between performance and pay is weak, how can they identify and fix any alignment issues up-front, before these issues become apparent to investors as they cast their Say on Pay votes?
Supervisors, boards and shareholders (who are finally getting a say on pay in America) are likely to have a more beneficial impact on pay practices than rules crafted by politicians, who tend not to think the consequences through.
In addition, relative TSR is used by vast majority (80 percent) of FTSE 250 companies in the UK for their performance share plans, due largely to the fact that their version of Say on Pay was implemented back in 2006.
As our clients get ready for the 2011 and 2012 Say on Pay disclosures, I wonder how realistic it is to think that shareholders will have the resources to take a deep dive into the pay programs of the companies in which they have invested.
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