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Note: The meeting reported below was organized by Stephen M. Davis, Ph.D., Project Director of Yale’s Millstein Center for Corporate Governance, who was invited in February 2007 to assume responsibility for defining the issues raised in the Forum’s advisory voting project.  The meeting’s host, Pfizer, has been represented in the Forum’s Advisory Panel.  For additional information about the meeting, see


RiskMetrics (f/k/a Institutional Shareholder Services - "ISS") Risk & Governance Weekly, April 11, 2008 article













Risk & Governance Weekly

In Brief


Issuers and Investors Attend Roundtable on Pay Votes

Some 150 representatives from more than 40 companies, 20 investor organizations, and 10 law firms and compensation consultancies attended an April 8 roundtable organized by the Working Group on Advisory Votes on Compensation.

Pfizer hosted the New York City forum, which was coordinated by Yale University's Millstein Center for Corporate Governance and chaired by Tim Smith, senior vice president of Walden Asset Management. The day-long meeting featured a series of panel discussions on various aspects of annual advisory votes, also known as “say on pay.” The issue continues to divide most institutions and companies, even as five U.S. issuers have agreed to hold such votes. Panel discussions included:

  • ways to improve board-shareholder communication around executive compensation;
  • a review of the United Kingdom’s experience with annual advisory vote resolutions;
  • how proxy advisory firms analyze executive compensation and view advisory votes on pay; and
  • how boards are approaching the issue, what concerns them, and how they are communicating with investors.

To encourage open discussion, the attendees agreed that all questions and comments would be kept confidential. Various papers presented to roundtable participants underscored points and concerns raised during the discussions. For example, “say on pay” generally is perceived as positive in other markets, though it has not resulted in pay declines or measurable improvements in pay for performance. Advisory votes likely have added more “rationality” to the pay process, as boards must consider how they will explain their executive pay decisions to shareholders, and whether there is a good business rationale for them.

There is some concern that annual advisory pay votes would require investors to expend more resources to analyze compensation (and may lead them to depend on proxy advisory firms) and that they could stifle boards' creativity in crafting performance-driven programs. However, the papers noted that there is no evidence that “say on pay” votes have had a detrimental impact on companies, investors, or performance in markets where they occur now.

One idea for U.S. implementation would be to make pay advisory votes a listing requirement (to ensure consistency across companies), but allow firms that receive a specified level of support in a given year to skip one or two years before the next required vote. Such a “carrot” could make U.S. issuers more comfortable with the concept, one panelist suggested. --Carol Bowie   

Additional documents on pay votes are available here and here.





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