Forum Summary

Reconsidering "Say on Pay" Proposals

The Shareholder Forum^TM has been asked by several participants to initiate a new program for reconsidering the “advisory voting” concepts defined in its 2006 project.[1]

When Forum participants first considered advisory voting, it was viewed as a process that could be adapted individually by corporate managers and investors as a foundation for constructive communication about common interests in a company’s success.  Its subsequent transformation into a confrontational activist demand for legislatively imposed “Say on Pay” has necessarily raised important new questions:

w   If advisory voting is required for all publicly traded US companies, can investors satisfy their fiduciary responsibilities without increasing reliance on proxy advisors or other bureaucratized processes?

w   Will focus on conformance with "good governance" theories[2] distract both corporate and investor decision-makers from the essential purpose of compensation to reward competitive success?

w   Ultimately, will advisory voting help investors make better decisions about their allocations of capital?

These and other concerns are reflected in increasing marketplace uncertainty about advisory voting.  Recent news reports of declining support for “Say on Pay” proxy proposals[3] have been countered by RiskMetrics-ISS reports presenting statistics to show that their activist client network seemed to be making progress.[4]  Academic research also reports significant divisions among investors, including between “governance” and investment representatives within fund managers, and further suggests that many of the governance professionals who advocate “compulsory” advisory voting view it as a means of increasing their influence.[5]

To address these issues, Sibson Consulting has supported the organization of this open Forum program to examine how “Say on Pay” might serve the public interest in essential marketplace processes of enterprise competition and capital allocation.  Corporate, investor and professional representatives with recognized expertise in successful performance will be invited to support the program in an advisory panel that guides the Forum’s conduct of workshops, academic studies, surveys, open meetings or other processes as required for a full public review of the issues and a concluding report.

This Forum program is open, free of charge, to all marketplace decision-makers and the professionals who advise them, according to the Forum's standard Conditions of Participation.