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September 10, 2008 Forum Report:

Inviting Comments on Study of Investor Views about Compensation


See comments:

C. William Jones, September 14, 2008

Brian P. Hillery, October 11, 2008



See also:



Forum Report

Inviting Comments on Study of Investor Views about Compensation

A report on institutional investor views of executive compensation issues is being released today by the Center On Executive Compensation, a Washington not-for-profit organization established by the HR Policy Association to advocate its corporate members’ interests in “compensation policies that serve the best interests of shareholders and other corporate stakeholders.”  Prepared by Kevin F. Hallock, Professor of Labor Economics and of Human Resource Studies at Cornell University, the study is based on interviews of individuals concerned with corporate governance policies at 20 of the 25 largest US institutional investors, who were asked a standard set of questions about subjects that included “Say on Pay” as well as related issues.

Copies of both the full report and the Center’s summary can be downloaded from the Forum’s web site:

  September 10, 2008, Kevin F. Hallock, Cornell University, commissioned by the Center On Executive Compensation: "Executive Compensation from the Perspective of the Largest Institutional Investors" (33 pages, 167 KB, in PDF format)

  September 10, 2008, Center On Executive Compensation: "Summary and Findings - In Their Own Words: Executive Compensation from the Perspective of the Largest Institutional Investors" (17 pages, 145 KB, in PDF format)

The section of Professor Hallock’s report addressing “Say on Pay” (pages 18-21) presents a very helpful selection of quotations representing a range of views and questions.  He summarizes his research in the beginning of the section (page 18):

Say on Pay

     The discussion on say on pay, a non-binding shareholder vote on executive compensation, was interesting. About half of those interviewed were against say-on-pay proposals for a variety of reasons, including that “the committee has better access to information than we do;” that such a plan may work for large investors but with dispersed ownership it would not; that they would prefer more engagement with directors; or that they would not know what firms would do in the event of a “no” vote. On the other hand, about one-quarter of organizations supported say on pay, with one noting that the threat of the vote could change firm behavior. Finally, the remaining organizations—about one-quarter—had a mixed or neutral view on the subject.

The report concludes with the following observations (page 32):

One issue that seemed quite clear in the study of investor responses is that they all have a common goal of earning money for their clients. It was also clear that most evaluate prospective firms for investment by considering a wide variety of factors, including (for many) executive compensation.

Although this issue is not studied in particular in this report, it may be the case that some of the strong views held by activist institutional investors are not generally held by the majority of or even very many of the largest institutional investors. A more in-depth analysis of the views of large institutional investors (perhaps with a formal structured survey) and an analysis of the differing views of activist investors and large investors is left for further study.

Your comments on the report will be appreciated, especially in relation to issues we should be prepared to address at the Forum’s open meeting on October 14.

           GL – September 10, 2008


Gary Lutin

Lutin & Company

575 Madison Avenue, 10th Floor

New York, New York 10022

Tel: 212-605-0335






This Forum program is open, free of charge, to anyone concerned with investor interests relating to shareholder advisory voting on executive compensation, referred to by activists as "Say on Pay." As stated in the posted Conditions of Participation, the Forum's purpose is to provide decision-makers with access to information and a free exchange of views on the issues presented in the program's Forum Summary. Each participant is expected to make independent use of information obtained through the Forum, subject to the privacy rights of other participants.  It is a Forum rule that participants will not be identified or quoted without their explicit permission.

The organization of this Forum program was supported by Sibson Consulting to address issues relevant to broad public interests in marketplace practices, rather than investor decisions relating to only a single company. The Forum may therefore invite program support of several companies that can provide both expertise and examples of performance leadership relating to the issues being addressed.

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