IRmagazine FROM THE EDITOR

Swept up

We're lucky here in New York to have a certain investment banker - Gary Lutin - who hosts a kind of salon for people to hash out shareholder issues of the day. I was permitted to attend his most recent forum on say on pay and, while it seemed a bit incongruous to discuss slashing other people's compensation in the plush surroundings of the Four Seasons Hotel, it was a most timely and appropriate topic.

That's because the huge amount of public money being spent on bailing out the banking and auto sectors has created strong momentum in congress for enacting rules to curb executive compensation. While you might think Lutin's assembly of institutional investors and governance advisers would celebrate legislated say on pay, they were actually wary of the costs and risks.

The forum participants, who are daily steeped in proxy issues, had little confidence congress would find a truly useful way to tackle the problem across all companies, given the complexity of the issue.

There is a danger of over-legislating, and creating another SOX, as one hedge fund investor complained. A pension fund representative said she wanted - and really might be satisfied with -better disclosure of how pay drives performance. Finally, a company that already reaches out for shareholder views on pay noted concern about being caught in a drag net.

It is surely good news for IR professionals that even corporate governance-focused investors are skeptical of a broad-brush approach - but beware: they are still open to the idea of a blanket rule. 'Having say on pay as a right changes how boards think,' one commentator said. 'There can be systemic benefits.'

Anna Snider

North American editor

January 2009