The company said shareholders would be given an advisory vote on its annual compensation report starting in 2009, introducing to the US a practice that has been required of UK companies since 2002.
“Shareholders, as owners of the company, have the right to know how executive compensation works,” said Dan Amos, chairman and chief executive.
Aflac’s move is a victory for a coalition of US and international shareholders that have sought to make a non-binding vote on executive compensation a key battleground in the upcoming season of annual shareholder meetings.
Last month, the Financial Times revealed that international fund managers with $1,500bn worth of assets, had joined forces with US state and institutional pension funds to urge regulators and companies to adopt the UK-style vote in the US.
So far, about 60 companies have received shareholders’ motions demanding a non-binding vote on executive compensation.
“Aflac has opened the door other companies will walk through,” said Richard Ferlauto, director, pension and benefit policy at the American Federation of State, County and Municipal Employees, the union that is one of the main drivers of the campaign. “The question is not if other companies will adopt this but when and on what schedule.”
Shareholder activists say their goal is to persuade regulators and stock exchanges to introduce rules on executive pay votes for all US-listed companies.
“The most comprehensive approach would be to have a listing standard on the issue,” said Tim Smith, senior vice-president at Walden Asset Management, one of the funds behind the campaign. “But in the meantime we will knock on numerous companies’ doors asking they take this step themselves.”
Shareholders’ desire to have a greater say on executive compensation has been fuelled by anger at the discrepancy between the large pay packages awarded to some executives and their companies' performance.
Copyright The Financial Times Limited 2007