Intel Corp. has become the latest company
to let shareholders vote on its executive-compensation policies, showing
that more big corporations are reacting to concern about high executive
pay and indications that Congress will take action.
The computer-chip maker will give shareholders
a nonbinding vote on its pay policies -- a "say on pay" vote -- at its
annual meeting in May, said Intel Corporate Secretary Cary Klafter. In the
past two weeks, both
Hewlett-Packard Co. and
Occidental Petroleum Corp. moved toward
annual shareholder votes on compensation in 2011 and 2010, respectively.
Sixteen U.S. companies now grant or plan to
grant shareholders advisory votes on executive pay; none of the votes will
be binding. A dozen more corporate boards are mulling whether to follow
suit, said Timothy Smith, senior vice president of Walden Asset
Management, which co-sponsored a shareholder resolution urging Intel to
adopt say on pay.
Walden and other activist investors
submitted or plan to submit resolutions at about 100 companies this year,
Mr. Smith said.
The moves underscore how the financial
crisis and last year's election are fueling efforts to police executive
compensation. Congress imposed some limits on executive pay for companies
that participate in the $700 billion financial-industry bailout, but
critics say those are inadequate and want stricter rules that would apply
to more companies.
President Barack Obama and key Democratic
lawmakers support requiring all public companies to offer shareholders an
annual advisory vote; Mr. Obama sponsored such a bill as a senator.
Legislation passed the House in 2007, but stalled in the Senate. Mary
Schapiro, the new head of the Securities and Exchange Commission, also
supports say on pay.
"It's not binding but people will be
unlikely to ignore it" because of all the negative publicity that would
engender, said Rep. Barney Frank (D., Mass.), chairman of the House
Financial Services Committee and a main proponent of say-on-pay
At Jackson Hewitt Tax Service Inc., nearly
a third of shares voted gave a thumbs down to the company's pay policies;
the board will take that "into consideration" during this year's pay
deliberations, said a spokeswoman.
Others express doubt about whether
shareholder votes limit compensation. "I don't know that companies will
necessarily be influenced by these votes except in the court of public
opinion," said Mark Borges, a principal at pay consultant Compensia Inc.
Shareholders in the U.K. have cast advisory
votes on pay since 2003. That year, a majority of votes cast opposed the
compensation plan at drug maker
GlaxoSmithKline PLC, and the company
agreed to overhaul its pay practices. Pay for U.K. executives has
continued to rise, but some activists think the shareholder votes have
Last week, Swiss activist investor group
Credit Suisse Group, Nestle SA and
UBS AG agreed to give shareholders
advisory votes on executive pay.
Many companies, including
Walt Disney Co. and
Apple Inc., argue against the move.
Opponents say it's hard for shareholders to parse complicated compensation
schemes and difficult for companies to know what such votes mean.
Just a year ago, support for the idea
seemed to be fading. Shareholder resolutions urging companies to adopt say
on pay won average support of about 41% of votes cast at 78 companies with
such votes last year, down from around 42% that supported the idea at 52
companies in 2007.
But public outrage about pay for top Wall
Street executives -- several of whom walked away with tens of millions of
dollars before their companies failed or required government support --
has changed the landscape.
Investor pressure persuaded Occidental
Petroleum, which had rejected say-on-pay shareholder proposals for two
years, to agree, said spokesman Richard Kline.
Intel, faced with its first say-on-pay
resolution this year, decided to grant the vote for similar reasons, said
Mr. Klafter, the corporate secretary. Intel also wanted the opportunity to
"adopt our own language" for the shareholder vote before Congress weighs
in, he said.
The early adopters are giving shareholders
a voice on different aspects of pay policies. RiskMetrics Group Inc., a
proxy advisory firm, last year asked its own investors to vote separately
on its overall compensation philosophy, 2007 awards and 2008 goals.
Bingo-hall operator Littlefield Corp. last
year asked shareholders to vote on whether its CEO's and directors' total
compensation was "within 20% of an acceptable amount." Both companies saw
a majority of votes support their pay practices.
Intel will ask shareholders to vote on its
executive-pay philosophy, policy and procedure, said Mr. Klafter. But the
board will likely caution investors that the wording may change in future
years. "Is this a useful tool? We'll see," said Mr. Klafter.