| FEBRUARY 26, 2009, 7:25 P.M. ET
Hundreds of Firms Must
Grant 'Say on Pay'
It's a sign of the fast-moving times:
Thursday, roughly 400 companies that received bailout money from the federal
government learned they'll have to let shareholders vote on their
executives' pay this year.
The advisory shareholder votes are among the
curbs on executive compensation imposed on firms -- largely banks -- that
take government money through the Troubled Asset Relief Program, or TARP.
They're included in the stimulus bill signed by President Obama on Feb. 17.
Thursday's notice, posted on the Securities
and Exchange Commission's Web site, said the rules apply to any firm that
files proxy statements after that date. The notice comes as many companies
are drafting and printing proxies, which could prompt a last-minute
scramble, experts say.
``It's definitely going to require
redrafting,'' says Broc Romanek, a former SEC counsel who edits
CompensationStandards.com, a Web site that specializes in executive
compensation. Mr. Romanek says he's been fielding help requests all day on
email and Twitter; he's planning an emergency Web seminar to give guidance
to TARP firms on Wednesday. ``Right now, people are scrambling to figure out
what to do.''
Among the first TARP recipients to comply was
Milwaukee-based lender Marshall & Ilsley Corp., which filed its proxy
Thursday, including a shareholder vote on its executive pay practices at its
April 28 annual meeting.
Investors, too, will have to quickly figure
out how to analyze and vote on the pay packages, says corporate-governance
monitor Gary Lutin. ``That's an even bigger challenge,'' he says.
At issue is a controversial practice dubbed
``say on pay,'' which gives investors an advisory vote on executive pay at
annual shareholder meetings. Critics say the practice is vague and
ineffective: it's hard to know what a ``no'' vote on pay means, and
companies don't need to heed the results.
But advocates say ``say on pay'' makes
companies take shareholder concerns more seriously when drafting pay
packages. Advocates include President Obama as well as political
heavyweights like House Financial Services Chairman Barney Frank.
Compensation experts say they expect Congress to pass a bill this year
requiring all listed companies to adopt ``say on pay.''
Mr. Romanek says say-on-pay votes could pack
an even bigger punch next year, because the New York Stock Exchange is
urging brokers to change their traditional practice of voting shares in
favor of management when individual owners don't vote. That shift, combined
with ``say on pay,'' could ``shift the paradigm of who oversees companies to
major shareholders,'' says Mr. Romanek.
Write to Phred Dvorak at
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