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For earlier reports of evolving marketplace views of the ISS client network campaign for its "Say on Pay" form of advisory voting, see:


RiskMetrics (f/k/a Institutional Shareholder Services - "ISS"), May 23, 2008 blog














Friday, May 23, 2008


U.S. Midseason Review
Submitted by: L. Reed Walton, Publications


Shareholder proposals requesting an annual advisory vote on pay--“say on pay”--have received slightly higher support at U.S. companies this year.

Pay vote proposals have averaged 43.1 percent support over 35 meetings where preliminary or final results are known, compared to 42.5 percent support in 2007, according to RiskMetrics Group data. So far this year, “say on pay” has won majority support at six companies. The most recent majority vote came at the May 20 meeting of Alaska Air Group, where a resolution submitted by shareholder William Davidge won 53 percent support, according to news reports. Another recent majority result came at the May 17 meeting of utility company PG&E, where a “say on pay” measure received 52 percent support, proponents say.

Other firms where advisory vote proposals have garnered over 50 percent support include South Financial Group, Lexmark, Motorola, and Apple. The AFL-CIO, which submitted the pay resolutions at Apple and Motorola, plans to ask the companies in July and August to start holding annual non-binding votes on compensation. (For more information, please see the “In Brief” section of the May 9 issue of Risk & Governance Weekly.)

Earlier this season, support for “say on pay” slumped at several financial firms where the issue was voted on last year. Support for advisory vote proposals dropped at Citigroup on (from 46.2 percent to 41.9 percent this year), at Wachovia (from 38.7 percent to 30.6 percent), and at Merrill Lynch (45.6 percent to 37.5 percent).

Overall, there has been higher median support for “say on pay” this year. Last year, three pay vote proposals received less than 30 percent support, and 33 won over 40 percent support. So far in 2008, no proposals have received less than 30 percent support, and 26 have won over 40 percent. Investors filed more than 80 “say on pay” proposals this year; more than 70 resolutions will go to a vote during the traditional U.S. proxy season, which concludes at the end of June. Upcoming meetings that have pay vote proposals on the ballot include Altria Group and ExxonMobil on May 28, Raytheon on May 29, and General Motors on June 3.

It’s difficult to assess the support for other shareholder proposals on executive pay this year since few results have been released so far by companies or reported by the news media. A new proposal from the American Federation of State, County, and Municipal Employees that asks firms to eliminate tax “gross-up” payments on CEO perks and compensation has gone to a vote at four meetings so far. The measure won a 48.2 percent vote at CVS Caremark, according to proponents. The drugstore company noted in its most recent proxy statement that former Caremark CEO William Spalding--who left the post after the buyout by CVS--was given an approximate $2.9 million excise tax gross-up payment last year.

Requests to link executive pay to company performance are faring about as well as last year, though many of the vote tallies have yet to be released by companies. The resolutions--mostly sponsored by the United Brotherhood of Carpenters and Joiners--have averaged 30.8 percent support at five meetings thus far, compared with 29.8 over 38 meetings during the 2007 proxy season. About as many pay-for-performance proposals will be voted this year as last. Proponents withdrew 18 resolutions after negotiations with companies, leaving 37 proposals on company ballots.

This year, there are also fewer shareholder proposals asking for an investor vote on supplemental executive retirement plans (SERPs) or exit pay packages. Few results have been released, but a SERP proposal won a 45 percent vote at Black & Decker, proponents say, and a “golden parachute” proposal won 35 percent support at Boeing, according to proponents.

Resolutions asking companies to abolish the practice of granting stock options to executives--submitted at five firms by investor Evelyn Y. Davis--has averaged 6.4 percent support. This is slightly higher than last year’s average of 4.3 percent across six meetings.

Governance-Related Proposals
Other governance-related proposals have also continued to receive high levels of support this season. Most of the resolutions asking companies to eliminate supermajority provisions have won majority backing so far. Of the seven meetings where preliminary or final results are available, those proposals have averaged 62.9 percent support. This widespread support is not unprecedented; shareholder requests to rescind supermajority voting rules averaged 67.8 percent in the 2007 proxy season, according to RiskMetrics data. Most of this year’s 14 resolutions have gone to a vote, though the proposal will be voted at Maine-based utility firm Energy East in June and H.J. Heinz in August.

Proposals asking for the right of investors to call special meetings are faring well for the second consecutive year. At 12 meetings where results are known, proposals asking that holders of 10 to 25 percent of outstanding stock be able to call meetings have averaged 51.8 percent support. Last year, those resolutions averaged 56.5 percent support at 18 meetings before June 30. Overall, 27 special meeting proposals are slated for a vote this year.

This year, investors have withdrawn most of the majority vote proposals (48 withdrawn) after negotiations with companies, but 31 are slated for a vote so far this year. Of 11 meetings where results are known, proposals have won an average of 45.3 percent support--not including a 92 percent result at RadioShack where company management supported the resolution. The best showing was 72 percent support at FirstEnergy. Majority vote resolutions received an average of 50 percent support over 36 meetings in 2007.

Board declassification proposals continue to win considerable support, with an average of 57.8 percent over seven meeting where results are known. Only one proposal so far has failed to win majority support. These proposals won an average of 63.9 percent support during the 2007 season.

So far, independent chair proposals are receiving record support. Those resolutions have averaged 32.1 percent support over 15 meetings this year, up from 30.2 percent support in 2006 and 24.8 percent support during the 2007 season. Investors will vote on the issue at Chevron and ExxonMobil on May 28, and at Legg Mason on July 22.

Proposals that ask companies to appoint an independent “lead director” with “clearly delineated duties” are on the ballot at six companies this year. So far, the resolution--new for 2008--has won 39.4 percent support at AT&T, 34 percent at Boeing, and 43.5 percent at Merck, according to preliminary tallies.

Support for cumulative voting is holding steady--averaging 34.1 percent support over six meetings so far. That compares to a 34.2 percent average across 22 meetings from January to June 30 last year. However, as most of the results for the 20 meetings at which the resolution appeared are not available, that number is likely to fluctuate as the companies holding second-quarter meetings begin reporting vote results in late July and August.

The California Public Employees’ Retirement System (CalPERS) once again submitted proposals to two companies asking that shareholders be allowed to amend the bylaws by majority vote. The resolution, which won 48.8 percent support at Eli Lilly in 2007 received slightly more support--49.3 percent--at the firm this year. The highest support for the proposal was an 80.6 percent result in October last year at Sara Lee, where CalPERS has resubmitted the measure this year.

Social and Environmental Proposals
Though most companies have not released vote results, social issue proponents have reported strong showings by proposals pertaining to greenhouse gas (GHG) emissions, sustainability reporting, human rights policies, and nanomaterial product safety.

Proposals asking companies to set specific targets for reducing GHG emissions won 33.7 percent support at Standard Pacific and a 41 percent vote at energy firm ConocoPhillips, according to proponents. These are the two highest results for this particular GHG proposal; the previous best showing, 31.1 percent, came at ExxonMobil in 2007. The resolution averaged 20.7 percent support over four meetings last year.

Resolutions that request sustainability reports are on the ballot at seven firms this year. Twenty-three sustainability proposals were withdrawn by proponents this year; in most cases, companies agreed to issue a report for the first time or to expand previous sustainability reports. A proposal at Dover received 39.5 percent support at the industrial products company’s May 1 annual meeting, according to proponents. This proposal averaged 27 percent support over 18 meetings last year.

A resolution asking companies to review or amend a standing human rights policy won 28.2 percent support at United Technologies, proponents reported. This is the third-highest result for a human rights-related shareholder proposal, excluding one at Newmont Mining last year that was backed by management. The highest came in at Cisco Systems in 2006 and 2007, with 28.9 and 35.8 percent support, respectively.

A new proposal this year asks companies to examine the safety of products containing nanomaterials, or components smaller than one micron (1/1000th of a millimeter). Avon Products shareholders gave the proposal 25 percent support--which is high for a first-year social issue proposal. Avon uses nanomaterials in some of its cosmetic products.

Editor’s Note: RiskMetrics Group reports vote percentages based on “for” and “against” votes cast and doesn't include abstentions or broker votes. This is the same approach the Securities and Exchange Commission uses under SEC Rule 14a-8(i)(12) to evaluate the support received by proposals in previous years. Please also note that many results are preliminary and do not include all 2008 meetings, because some companies have declined to release vote totals on shareholder resolutions until their next quarterly regulatory filing. Finally, the 2007 averages include only those meetings that occurred from Jan. 1 through June 30 of that year


Copyright © 2007 RiskMetrics Group



Say on Pay Results: 2007 vs. 2008


2007 %

2008 %

% Pt. Increase (Decrease)













Bank of America




Bank of New York Mellon








Burlington Northern Santa Fe












Edison International




Electronic Data Systems




Goldman Sachs




International Business Machines




Lexmark International*




Lockheed Martin








Merrill Lynch




Morgan Stanley




U.S. Bancorp








Waddell & Reed Financial




Source: RiskMetrics Group data as of April 30. All vote results are preliminary; the support percentages are based only on votes "for" and "against."
*Proposal received majority support, though vote results were not disclosed.





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