June 26, 2012, 12:33 AM ET
The Big Number: 106
That’s the number of
supplemental proxy filings the SEC received this year on executive-pay
The hundreds of pages that
companies file each year in their annual proxy statements apparently aren’t
The Securities and Exchange
Commission received 106 supplemental proxy filings this year through June
20, 83% more than a year earlier, according to executive-compensation firm
Semler Brossy Consulting Group.
The filings have become a
forum for arguing with proxy advisers such as Institutional Shareholder
Services and Glass Lewis Co. when they urge shareholders to oppose the
company in so-called “say on pay” votes.
“This is a second attempt to
say ‘perhaps we weren’t as clear as we could have been in explaining our
compensation strategy,’ ” says Blair Jones, managing principal at Semler
Companies mostly focused their
supplemental filings on justifying the way they link pay to performance,
with 99 of the filings discussing that issue. Some 56 of the filings
expressed objections to the peer groups that proxy firms picked to compare
The spike in filings may be
short-lived because it isn’t clear they work. ISS has reversed its
recommendation after a filing just four times this year. In each instance,
the company involved had made substantial changes in its compensation
program. Investors say unless a proxy firm has made a serious error, they
don’t like a company claiming the firm erred in its analysis.
“Saying [the proxy advisers]
calculated something wrong really irks us because we’ve just now read two
pages more than we wanted to read,” Stephen Brown, associate general counsel
at pension fund TIAA-CREF, told a conference in New York this month.
Companies that got a negative
recommendation from ISS and made supplemental filings on average received
59% support from shareholders in say-on-pay this year, while companies that
got a negative recommendation but made no supplemental filing won 66%
support, says Semler Brossy.
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