Forum Report: “Say on Pay”
Progress of 2010 “Say on Pay” Projects
Current plans for the continuing “Say on Pay” program are focused on
supporting the practical adaptations of Forum participants to both investor
and corporate responsibilities associated with anticipated voting
requirements. Your advice will be appreciated to help guide our progress
with the projects summarized below and to suggest others that might be
Investor Survey – Phase 2: What Information
Companies Should Provide
reported in December, an initial Forum survey of voting criteria for
compensation-related issues established that most investors want information
directly from companies – over 70% of investors ranked management sources
either “critical” or “important,” compared with only 38% and 29% giving
those rankings to governance experts and proxy advisors, respectively – and
that we would therefore be following up with another survey to get a more
detailed definition of what should be provided.
We are now in the process of drafting and testing a questionnaire that is
expected to focus on these issues:
How much attention can the investor devote to different voting
What conditions will stimulate a need for more information?
How should the information be presented?
The objective of this project is to find out from the actual investor
decision-makers how corporate managers can most effectively respond to the
interests of their shareholders. Any thoughts on what we should be asking
will be welcomed.
Last year’s “Say
on Pay 2009” clearinghouse web site, managed for the Forum by the
Corporate Secretary and
IR Magazine, was very useful to both corporate and investor
professionals as a reliable reference to the issues everyone needed to
understand. We plan to refine the project for 2010, with expanded “focus
sections” concentrating primarily on the practical communication and process
requirements of implementing advisory voting on compensation.
If you tell us what you expect to be considering, we’ll try to find someone
with relevant expertise to lead an “SOP 2010” focus section addressing that
Simple Responses to Standard Investor
As some of you have observed, the widely supported objective of developing
broad investor consensus for some standard set of questions – presumably, a
variation of the
TIAA-CREF “Ten Questions” – might be sensibly combined with the more
recent interest in
establishing independent “verification” processes for management reports
of policies or practices. This, at least theoretically, would allow
corporate managers to present relatively brief, easily understood responses
to investor interests supported by assurances that a qualified independent
party has conducted due diligence of the details.
Anyone interested in helping to define either the standard questions or a
process for response verification is encouraged to participate.
Considering that the
original 2006 Forum interest in advisory voting was “as a foundation for
cooperative communication,” the current program has naturally involved
attention to the processes for those desired communications. Questions have
been raised, though, about whether such issues as
standards for “virtual” annual meetings and
proposals for “client directed voting” need to be addressed as part of
our effort to understand the requirements of implementing “Say on Pay,” or
whether we should treat those issues as being beyond the scope of this
Your views of what issues should be addressed will be especially helpful in
relation to these important but complicating subjects.
GL – February 17, 2010
Lutin & Company
575 Madison Avenue, 10th Floor
New York, New York 10022