The Shareholder ForumTM


"Say on Pay" Proposals

Forum Home Page

"Say on Pay" Home Page

Program Reference


The excerpt below, presented with permission of both the author and publisher, is from the following journal article:


Directors & Boards, Annual Report 2008 article (excerpt)


Directors & Boards


Shareholder rights




Peter C. Clapman retired as senior vice president and chief counsel for TIAA-CREF in 2005 after 32 years with the retirement funds investment organization, where he headed the corporate governance program. He currently is a partner of Governance for Owners LLP, a U.K.-based investment organization that offers global investment and governance products and services to institutional investors, and is president and CEO of its U.S. corporate governance operations. In 2007 he authored “The Clapman Report,” a set of best practice principles for managing pension, endowment, and charitable funds, an initiative of the Stanford Law School Institutional Investor Forum, for which he chairs its Committee on Institutional Investor Governance.

Next steps? Be careful what you wish for

In the name of advancing shareholder rights, let’s not harm shareholder interests.


By Peter C. Clapman



      Whether shareholders should have an advisory vote on compensation and at which companies — the so-called say on pay — also raises these concerns [about long term investor interests]. One approach, which I favor, would be for shareholders to utilize the shareholder proposal process in selective cases at companies that have demonstrated poor practices. The other approach would be to require such a vote at all companies, as is the practice in the U.K. Congressional legislation to require such votes at all companies has been introduced.

Problems with say on pay

     In my view, universally applied say on pay is more problematic than helpful. For all practical purposes, a shareholder right to say on pay already exists, since the option of withholding votes from compensation committee members is not only available but is being widely exercised. Thus, there is a link between this issue and majority vote. Compensation disclosure under recent SEC rules is increasingly complex and lengthy. Considerable work is needed to intelligently assess such disclosure in individual company proxy statements. There is a fair likelihood that companies would begin to standardize pay practices for ease of disclosure, rather than to exercise appropriate judgment as to the particular factors that should best apply to their compensation practices.

     If applied to a universe of 10,000-plus public companies in the U.S. (in contrast to far fewer companies in the U.K.), most shareholders simply will not devote the necessary staff resources to vote intelligently as individual shareholders and will outsource the voting decision. The inevitable consequence would be to transfer considerable discretionary power over individual company compensation practices to the proxy advisory firms. I question that such an approach will serve the long-term best interests of shareholders.

     My conclusions on current-day issues of corporate governance stem from my beginning premise that “good corporate governance” means working to achieve the right balance among management, boards, and shareholders. That balance may mean that adding new shareholder powers does not necessarily equate to advancing shareholder interests. For long-term shareholders, adding new shareholder powers that go too far may actually be contrary to good corporate governance. At some point, by eroding the authority of boards, we risk lessening rather than enhancing boardroom accountability.





The author can be contacted at


This article appeared in the Annual Report 2008 special edition of Directors & Boards.


Copyright © 2008 Directors & Boards, P.O. Box 41966, Philadelphia, PA 19101-1966. All rights reserved.




This Forum program is open, free of charge, to anyone concerned with investor interests relating to shareholder advisory voting on executive compensation, referred to by activists as "Say on Pay." As stated in the posted Conditions of Participation, the Forum's purpose is to provide decision-makers with access to information and a free exchange of views on the issues presented in the program's Forum Summary. Each participant is 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.

The organization of this Forum program was supported by Sibson Consulting to address issues relevant to broad public interests in marketplace practices, rather than investor decisions relating to only a single company. The Forum may therefore invite program support of several companies that can provide both expertise and examples of performance leadership relating to the issues being addressed.

Inquiries about this Forum program and requests to be included in its 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. The material presented on this web site is the responsibility of Gary Lutin, as chairman of the Shareholder Forum.