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CFO Journal. (The Wall Street Journal Digital Network), June 26, 2012 article



CFO Report


June 26, 2012, 12:33 AM ET  

Supplemental Proxy Filings Surge



[Emily Chasan]

Emily Chasan
Senior Editor

The Big Number: 106

That’s the number of supplemental proxy filings the SEC received this year on executive-pay plans.

The hundreds of pages that companies file each year in their annual proxy statements apparently aren’t enough.

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 Brossy.

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 them with.

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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