09/28/2009
Does "say on pay" work?
By Cydney Posner
You might be interested in this article from the Washington Post, reporting that, on average, 88.6% of votes cast at 237 firms were in favor of management, and no pay package was rejected. These include primarily TARP recipients! The impact: "Some governance experts are questioning the effectiveness of 'say-on-pay' votes -- a key tool being touted by the Obama administration and lawmakers for reining in runaway executive compensation. Critics point to the results as evidence that many shareholders lack time and resources to analyze complicated pay plans or have little faith in a nonbinding vote that companies have no obligation to act upon." [Or maybe they don't even open their proxy envelopes!] A number of Wall Street firms received the most positive responses: "At Goldman Sachs and J.P. Morgan Chase, more than 97 percent of votes were cast in favor of the compensation plans. American International Group received 98.2 percent approval. Morgan Stanley pay packages drew 94 percent support, while Citigroup and Bank of America collected 84 percent and 71 percent, respectively." Some commentators contend that the say-on-pay process essentially backfires because, armed with these results, companies can now claim that their executive pay packages have been ratified by the shareholders. Others have argued that the proposals promote dialogue and that effectiveness of say on pay will increase as other reform efforts take hold.