Forum Report: “Say on Pay”
Comments on Frequency of "Say on Pay"
Voting
Referring to this week's report
of views concerning the choice of frequency for "Say on Pay" voting, Ed Durkin of the United Brotherhood of
Carpenters ("UBC") has provided a copy of his memorandum arguing
for proxy advisor adoption of a policy supporting the "triennial" practice
he has advocated:
Mr. Durkin bases his position primarily on his belief that triennial voting
would allow more careful investor consideration of company-specific issues
and lead to more effective communication between investors and corporate
managers, as explained in these selections from his memorandum:
It is our concern that ISS' proposed default
recommendation for an annual say-on-pay vote does not advance the most
effective formulation of the say-on-pay vote, in that it promotes the
quantity of say-on-pay votes over the quality of such votes. The ISS
overview piece states that the say-on-pay vote "is at its essence a
communication vehicle, and communication is most useful when it is
received in a consistent manner." We believe that the "most useful"
communication vehicle would be an informed vote based on thorough and
comprehensive pay plan analysis. An annual vote at thousands of
companies would challenge the ability of large institutional investors
to undertake a thorough analysis of portfolio companies' pay plans or
an appropriate review of the vote recommendations of their advisory
firms. The quality and thoroughness of the pay plan analysis
supporting say-on-pay votes, not their frequency, will determine the
usefulness of the vote in improving executive compensation. [page 2,
paragraph 1] *** Our view is that
a periodic say-on-pay vote could be a valuable part of a complementary
set of advocacy tools that include company-investor dialogue,
shareholder proposals, equity and incentive plan votes, and, if
warranted, votes AGAINST director nominees. The ISS proposed annual
default voting guideline on say-on-pay frequency votes may undermine
the development of a thoughtful and effective executive compensation
advocacy system. ...While it may be counter-intuitive for a proxy
advisor firm to suggest fewer shareholder vote opportunities, in this
instance, less is more. Less frequent say-on-pay votes will allow for
more comprehensive and thorough plan analysis, more informed voting,
more effective advocacy, and ultimately more effective executive
compensation reform. [page 3, concluding paragraph] |
Comments
of Forum participants will be welcomed,
on Mr. Durkin's views and on other issues relating to the implementation of
"Say on Pay" voting.
GL – December 3, 2010
Gary Lutin
Lutin & Company
575 Madison Avenue, 10th Floor
New York, New York 10022
Tel: 212-605-0335
Email:
gl@shareholderforum.com
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