Executive compensation and “say-on-pay” proposals – submitting executive compensation to an annual shareholder advisory vote – have become the top shareholder issues in the 2007 proxy season. “Say-on-pay” resolutions are being brought forth at over 40 companies this year, as shareholders look to build transparency into pay packages of top corporate executives.
In late April, the issue was brought in front of the US House of Representatives, with the subsequent vote passing by 269-134. Bill H.R. 1257, the “Shareholder Vote on Executive Compensation Act,” will not set limits on pay, but would give shareholders an annual advisory vote on executive pay. Companion legislation was introduced in the US Senate on April 20, but has not yet been debated in Senate committees.
Developments on say-on-pay at recent AGMs reflect the interest in this issue. At Merck & Co., shareholders pushed the issue of executive compensation near the tipping point by casting 49.2% in support for a say-on-pay proposal. Further shareholder support for advisory votes on executive pay was evidenced May 3 at Verizon’sAGM, where the result was “too close to call.” The final count is to be announced shortly. And at Blockbuster, a proposal from New York City pension funds reached 57%.
To monitor growing interest in say on pay, ISS Proxy is maintaining the “Say on Pay Information Center,” which provides background information on the issue of executive compensation and keeps track of upcoming say on pay proposals.