Shareholder Forum for Options Policies

Forum Home Page

Options Policies Home Page

Program Reference


Note: The proposal for advisory voting on compensation referenced in the article below was submitted by Hermes Equity Ownership Services, and had been offered at the December 2006 Forum meeting as an example for U.S. adaptation of advisory voting practices.

For reports of the article's referenced vote on a similar proposal submitted to Verizon shareholders, see

For additional information about the Forum's project relating to the development of a model for advisory voting on executive compensation policies, see

Advisory Voting


Wall Street Journal, May 26, 2007 article


The Wall Street Journal  

May 26, 2007


Executive Pay
Next Skirmish Is at UnitedHealth

May 26, 2007; Page A2

Executive compensation will be back in the spotlight Tuesday at the annual meeting of UnitedHealth Group Inc.

Shareholders will consider proposals to tie executive pay more closely to corporate performance, to curb special retirement benefits and to give themselves an annual advisory vote on executive pay deals. The health insurer is in investors' sights after acknowledging that it backdated stock options to enrich executives, prompting last year's resignation of Chief Executive William McGuire.

[Go to CEO Compensation Scorecard]1 MORE
Compensation Scorecard:2 See a sortable chart of pay and perks for dozens of CEOs.

Similar shareholder measures failed to win majority support Thursday at Home Depot Inc., which has also faced questions about compensation. A "say on pay" resolution for an annual advisory vote was backed by 43% of shares voted. That's also the average level of support for similar measures at 21 companies that have announced results this year, according to Institutional Shareholder Services. The measures have won majority support so far at just two companies -- Verizon Communications Inc. and Blockbuster Inc.

Defenders of the status quo might be encouraged by those results. In electoral politics, 43% is a resounding defeat. But corporate politics isn't played by the same rules.

First off, 43% is considered a strong showing for a new corporate-governance proposal. The advisory-vote idea -- modeled on requirements in countries such as Britain and Australia -- first surfaced at U.S. annual meetings last year. Roughly 40% of the shares voted at seven companies last year supported the concept. This year, both the number of companies confronting the issue, and the level of support, are up.

That makes the say-on-pay movement resemble another governance trend -- requiring unopposed directors to win a majority of votes cast to be elected, rather than a plurality. Just three years after it first surfaced, majority voting is now the rule at roughly 60% of the companies in the Standard & Poor's 500-stock index, according to Claudia Allen, of Neal, Gerber & Eisenberg LLP.

Here's another reason 43% may understate the demand for change: ISS's Patrick McGurn says several of his clients -- institutional investors such as pension funds and mutual funds -- have told him that they consider the resolutions too weak. They prefer to pressure directors directly by withholding votes for their re-election. That tactic contributed to the departures of former Home Depot CEO Robert Nardelli and Pfizer Inc. CEO Henry McKinnell.

Finally, consider the action in a more important arena -- Congress. A bill that would require annual advisory shareholder votes on executive compensation passed the House last month, by a veto-proof 269-134 margin.

Senate approval is hardly certain. The White House threatens a veto. And business groups oppose the measure. Thomas Lehner, policy director for the Business Roundtable, says the law would paint all companies with a single brush, requiring an advisory vote "even where pay has never been an issue." As a practical matter, he says, it would be hard for directors to interpret an up-or-down "no" vote on a compensation plan and make changes.

But supporters view the 55 House Republican votes in favor of the measure as an indication of the political winds. Home Depot's new CEO, Frank Blake, put it this way for his shareholders on Thursday: "We're seeing a kind of societal shift around what shareholders are willing to pay their CEOs," he said.

Write to Scott Thurm at scott.thurm@wsj.com5

  URL for this article:

  Hyperlinks in this Article:
Copyright 2007 Dow Jones & Company, Inc. All Rights Reserved
This copy is for your personal, non-commercial use only. Distribution and use of this material are governed by our Subscriber Agreement and by copyright law. For non-personal use or to order multiple copies, please contact Dow Jones Reprints at 1-800-843-0008 or visit



This Forum program is open, free of charge, to all shareholders of the invited corporate participants, and to any fiduciaries or professionals concerned with the investment decisions of those shareholders, according to the posted Conditions of Participation.  The Forum's purpose is to provide shareholders with access to information and a free exchange of views on issues relating to their investment interests described in the Forum Summary As stated in the Conditions, all Forum participants are 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.

This Forum program has been organized with the support of Hermes Equity Ownership Services, Ltd.  It is the first in an expected series that will be managed by a not-for-profit “Institute” to be established for the purpose of continuing the Forum programs conducted by Gary Lutin.

Inquiries and requests to be included in the Forum's distribution list may be addressed to  The information provided to Forum participants is intended for their private reference, and permission has not been granted for the republishing of any copyrighted material.

All material on this web site is published by Gary Lutin, who is responsible for conducting the Forum.