Note: The article below reports confusion about pro forma voting calculations that were noted in the Forum's August 25, 2008 distribution of the referenced RiskMetrics-ISS report. Responding to the Forum, the author of the RiskMetrics report stated that the firm was following SEC guidelines for determining voting support of shareholder proposals, which count votes cast "For" a shareholder proposal as a portion of only the votes cast "For" and "Against." Abstentions, which represent deliberate shareholder decisions not to vote in favor of a proposal (as distinguished from "non-votes"), are not included in the calculation.

For the SEC guidelines, see section F.4 of SEC Division of Corporation Finance: Staff Legal Bulletin No. 14, dated July 31, 2001. No explanation could be found for the SEC staff's use of a calculation that differs from what is actually used to determine shareholder approval, and that treats abstentions for shareholder proposals differently from abstentions or "withhold" votes for management director nominees.

Details of the Valero Energy vote and links to sources can be found in the Forum notes to the referenced RiskMetrics report:

August 25, 2008 RiskMetrics (f/k/a Institutional Shareholder Services - "ISS") Risk & Governance Weekly: "Another Majority Vote for 'Say on Pay'"

More Holders Back "Say on Pay" in 2008

Risk Metrics says 10 firms had affirmative stockholder votes this proxy season, up from 8 last year.

Stephen Taub - CFO.com | US

August 27, 2008

With the vote by shareholders at Valero Energy Corp. a shareholder-voting majority at 10 companies supported nonbinding resolutions calling for a so-called Say on Pay policy during this year's proxy season, according to Risk Metrics.

Altogether, the shareholder proposals — offering holders a vote only on the total compensation to be provided to a company's top five executives, rather than their individual pay packages — have averaged 42.7 percent support over 56 meetings this year, according to the proxy research firm. Last year, eight companies had positive votes on the advisory-only provisions.

None of these companies is required to institute such a policy, however, since Say on Pay provisions are not binding. Thus, skeptics wonder how much "say" the investors actually have, beyond the psychological message that is sent to the company board and officers.

In April, Sen. Barack Obama endorsed Say-on-Pay as a part of his bid for the Democratic nomination for president.

Among the companies receiving majority support for such a policy this year include Apple Computer, Ingersoll Rand, Tech Data, and Lexmark. This was the second straight year Say on Pay proposal won more than 50 percent of the votes at Ingersoll Rand, and last year, Apple received 46.6-percent support, according to Risk Metrics.

The proxy firm noted, however, that of the companies receiving majority support this year, only Tech Data so far had agreed to adopt an annual non-binding vote on pay.

The vote at Valero Energy, however, offered a twist. The company disclosed in an Aug. 8 regulatory filing that 53.7 percent of shareholders voted for the measure, while 46.3 percent voted against. The number of abstentions, however, equaled half the number of affirmative votes. So Valero calculated that the measure received just 42.4 percent total affirmative votes, versus 57.5 percent negative votes, leading the resolution to fail.

According to its filing, shares voting to abstain are treated as "present" votes for purposes of determining a quorum, but have the effect of negative votes when approval for a proposal requires majority voting power of issued and outstanding shares, or a majority of the voting power of the shares present in person or by proxy and entitled to vote.