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Comments of
Cornish F. Hitchcock
August 4, 2008
To keep the dialogue
going on this subject, and in anticipation of this Forum program’s meeting.
. .
I think that
Jeffrey Gordon’s paper and
John Wilcox’s comments do an
excellent job of framing the major issues in this area. One thought that I
took away from reading John’s comments is to view the advisory vote as a
general vote of confidence or no confidence in the direction that the CD&A
has charted, with the emphasis being on the overall linkage of pay to
performance. I take John’s point that devising a compensation plan is a
board responsibility, not a shareholder responsibility. That said, I think
that you need to put on the table another facet of shareholder engagement on
compensation issues, namely, the ability of shareholders to raise policy
issues on specific compensation issues, as happens now on topics such as
golden parachutes, SERPs, pension credits, etc.
I could easily argue for
using this tool as a targeted means of raising concerns independently of
(and as a supplement to) the broader strategic question raised in an
up-or-down advisory vote on the entire CD&A.
A broader theoretical
question, which deserves to be raised again in this discussion, is whether
the market for executive compensation is functioning properly. For example,
does the market really demand paying executives a salary for ten years after
their death, or paying for a “no-compete” clause after they’re dead – to
take a few examples reported by the WSJ in June? (I would term these “pay
for no pulse.”) Assuming one believes that these practices are not good
governance or part of an effective and motivational compensation philosophy,
what should a shareholder do? Vote “no” on an advisory vote? Submit a
shareholder resolution on the topic? Start a “vote no” campaign against
Comp Committee members who are up for election this year? Any or all of the
above? None of the above?
The obligatory
disclaimer: These thoughts are my own and should not be attributed to any
client.
Con
Cornish F. Hitchcock
Hitchcock Law Firm
Washington,
DC
(202) 489-4813
conh@hitchlaw.com |