In our e-mail today was the
text of a posting by the director of publications at the RiskMetrics
Group, Ted Allen. (It was forwarded to us by Gary Lutin at
The Shareholder
Forum, which is currently hosting an ongoing forum on “Say on Pay” and
acts as a clearinghouse of information on the topic. Allen’s
post is titled “A ‘New Opening’ for Investors,” referring to the
incoming administration of President-elect Barack Obama.
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“Activist investors are looking fors that go beyond those adopted in
2002 in response to the accounting scandals at Enron and
WorldCom.ward to a change in leadership at the Securities and
Exchange Commission. Chairman Christopher Cox plans to leave when
the Bush administration’s term expires in January, so the new
president will name a new chairman to join the two Democrats and two
Republicans already on the five-member commission. Given the public
attention to the financial crisis, Obama likely will focus on the
SEC soon after he names a new Treasury secretary.” |
The current financial crisis
and the controversial bailout of Wall Street firms, not to mention larger
Democratic majorities in both the House and Senate, Allen writes, will
likely lead to “a wave of governance and regulatory reform”
He catalogues a list of
corporate governance and executive compensation issues that are likely to
be addressed by a re-configured SEC commission:
- requiring public
companies to hold an annual advisory vote on compensation.
- revival of a proposal by
the New York Stock Exchange to end the counting of “broker votes” (i.e.,
shares where clients have given no voting instructions) in uncontested
board elections
- revival of a proposal
debated for decades at the SEC, which has been on hold since November
2007 when the agency’s Republican majority voted to allow companies to
omit shareholder proposals that seek access bylaws to give investors who
own a minimum stake, such as 3 or 5 percent the right to place board
nominees on management ballots
- limiting “golden
parachute” severance payments
- broadening “claw back”
provisions to recoup executive bonuses based on financial results that
are later restated
- requiring enhanced
disclosure of compensation consultant conflicts,
- imposing new
restrictions on deferred compensation,
- further limiting the
funding of supplemental executive retirement plans,
- tightening the U.S. tax
code’s definition of performance-based pay used to exempt it from
deductible limits
In 2007 the House of
Representatives passed “say on pay”
legislation with some Republican support, but a
companion bill in the Senate — sponsored by Obama himself — got
stalled. We’d say chances of a bill like it being passed in 2009 got a
whole lot better this week.
