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For the Forum report of the SEC position, including a link to the referenced notice, see


Wall Street Journal, February 27, 2009 article


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MANAGEMENT   |   FEBRUARY 26, 2009, 7:25 P.M. ET

Hundreds of Firms Must Grant 'Say on Pay' 

It's a sign of the fast-moving times: Thursday, roughly 400 companies that received bailout money from the federal government learned they'll have to let shareholders vote on their executives' pay this year.

The advisory shareholder votes are among the curbs on executive compensation imposed on firms -- largely banks -- that take government money through the Troubled Asset Relief Program, or TARP. They're included in the stimulus bill signed by President Obama on Feb. 17.

Thursday's notice, posted on the Securities and Exchange Commission's Web site, said the rules apply to any firm that files proxy statements after that date. The notice comes as many companies are drafting and printing proxies, which could prompt a last-minute scramble, experts say.

``It's definitely going to require redrafting,'' says Broc Romanek, a former SEC counsel who edits, a Web site that specializes in executive compensation. Mr. Romanek says he's been fielding help requests all day on email and Twitter; he's planning an emergency Web seminar to give guidance to TARP firms on Wednesday. ``Right now, people are scrambling to figure out what to do.''

Among the first TARP recipients to comply was Milwaukee-based lender Marshall & Ilsley Corp., which filed its proxy Thursday, including a shareholder vote on its executive pay practices at its April 28 annual meeting.

Investors, too, will have to quickly figure out how to analyze and vote on the pay packages, says corporate-governance monitor Gary Lutin. ``That's an even bigger challenge,'' he says.

At issue is a controversial practice dubbed ``say on pay,'' which gives investors an advisory vote on executive pay at annual shareholder meetings. Critics say the practice is vague and ineffective: it's hard to know what a ``no'' vote on pay means, and companies don't need to heed the results.

But advocates say ``say on pay'' makes companies take shareholder concerns more seriously when drafting pay packages. Advocates include President Obama as well as political heavyweights like House Financial Services Chairman Barney Frank. Compensation experts say they expect Congress to pass a bill this year requiring all listed companies to adopt ``say on pay.''

Mr. Romanek says say-on-pay votes could pack an even bigger punch next year, because the New York Stock Exchange is urging brokers to change their traditional practice of voting shares in favor of management when individual owners don't vote. That shift, combined with ``say on pay,'' could ``shift the paradigm of who oversees companies to major shareholders,'' says Mr. Romanek.

Write to Phred Dvorak at


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