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Investor Relations Magazine, December 5, 2008 article


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Even major investors wary of ‘say on pay’ legislation


Dec 05, 2008

Pros may not outweigh cons, forum participants say

Thirty institutional investors, lawyers, academics, and governance advisers gathered at The Shareholder Forum in Manhattan yesterday to discuss the momentum in Congress for enacting rules to curb executive compensation. While the participants say legislated ‘say on pay’ in the US is an attractive option, there is real concern about the costs and risks.

There is strong support among Democrats and Republicans for requiring public companies to hold annual non-binding votes on top officers’ compensation. But the forum participants, who are steeped in proxy issues daily, said they had little confidence that Congress would come up with a truly useful way to tackle the problem across all companies, given the complexity of the issue.

Even those who seek curbs on pay are reluctant to over-legislate. ‘There’s the feeling that we don’t want another SOX,’ said one governance-focused investor, who like all the other participants, spoke on a not-for-attribution basis.

Some delegates suggested allowing a longer time for companies to adjust to the SEC’s recent tightening of rules around compensation, discussion and analysis (CD&A) disclosure before undertaking major change. One pension fund investor said the SEC’s revised guidance is getting at what she wants, though companies still haven’t mastered CD&A reporting.

Investors want, and really may be satisfied with, a clear focus on how compensation drives business performance. They would also like to see a consistent response when they raise pay issues directly with corporate secretaries and IR contacts. ‘We get a range of responses from them not returning phone calls to calling us back ten times a day,’ said one.

A company that does reach out to shareholders on the pay issue noted concern about being caught in a dragnet. ‘Why should [we] be painted with the same brush as those who don’t respond to questions on pay?’ said one corporate officer.

Still, there is a key plus to having a blanket rule. ‘Having say on pay as a right changes how boards think,’ said one attendee at the forum, which was organized by investment banker Gary Lutin. ‘There can be systemic benefits.’

By Anna Snider


© copyright 2008 Cross Border Ltd




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.

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