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Note:  In the article below, RiskMetrics-ISS discloses that its report of a 53.7% vote in favor of "Say on Pay" for Valero Energy is actually a pro forma metric, calculating votes cast "For" a shareholder proposal as a portion of only the votes cast "For" and "Against," excluding the abstentions which represent deliberate shareholder decisions not to vote in favor of a proposal.

Responding to the Forum, the article's author stated that RiskMetrics uses this pro forma methodology according to an SEC staff guideline for calculating votes on shareholder proposals.  (See section F.4 of SEC Division of Corporation Finance Staff Legal Bulletin No. 14, dated July 31, 2001.)  No explanation could be found for the SEC staff's use of a calculation that differs from what is actually used to determine shareholder approval, and that treats abstentions for shareholder proposals differently from abstentions or "withhold" votes for management director nominees.

A conventional vote count, applying standard rules for determinations of shareholder approval, was in fact reported by Valero in its SEC Form 10-Q filed August 8, 2008.  The 167,728,593 votes cast "For" the shareholder proposal represented only 42.38% of relevant votes present and entitled to vote, which would be 31.52% of the 532,138,180 shares reported in the company's proxy statement to be outstanding as of the record date.  The number of shares abstaining or "withheld" was 83,201,521, calculated to be 21.02% of votes present and 15.64% of shares outstanding.

For the Valero report's details and explanations of applicable rules for counting the "Say on Pay" vote, see Proposal 4 on page 59, in "Item 4. Submission of Matters to a Vote of Security Holders."


RiskMetrics (f/k/a Institutional Shareholder Services - "ISS") Risk & Governance Blog, August 25, 2008 article














Monday, August 25, 2008


Another Majority Vote for “Say on Pay”
Submitted by: Carol Bowie, Governance Institute


Valero Energy recently disclosed results for the Advisory Vote on Compensation proposal that its shareholders voted on this year – the tally shows support of 53.7 percent (based on votes cast for and against), up from 53 percent support for the same proposal in 2007. Both years’ resolutions were submitted by the Unitarian Universalist Association of Congregations (UUA).

Valero thus becomes the tenth company on this year’s list of majority supported “say on pay” shareholder proposals. The list stopped at eight firms in 2007. Under its bylaws, Texas-based Valero counts abstentions when tallying results for shareholder proposals, and by its reckoning the measure did not pass. Valero spokesman William Day told Risk & Governance Weekly that, so far, the company has no plans to address the proposal.

In another distinction, the Valero resolution is the second to get majority backing from votes cast for two years in a row. The other was voted on at Ingersoll Rand. The measure also garnered 50.7 percent support at computer maker Apple this year after obtaining a near-majority (46.6 percent) in 2007.

While support declined somewhat at several financial firms that had the resolution on their ballots over the last two years, overall “say on pay” shareholder proposals have averaged about 42 percent support so far this year over more than 50 meetings where votes have been reported, according to RiskMetrics data – virtually the same level as 2007. Only two votes remain pending for fall meetings, at Procter & Gamble and Oracle. Proponents may currently be more focused on this year’s political election, which may give a boost to their push for advisory pay votes. According to the draft Democratic national platform released on Aug. 7, for example, party leaders “will ensure shareholders have an advisory vote on executive compensation, in order to spur increased transparency and public debate over pay packages.”

What are your views on "say-on-pay" this year. Please let us know.


Copyright © 2007 RiskMetrics Group




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