Waddell & Reed shareholders
vote against say-on-pay
Apr 16, 2010
The vote-no campaign may have worked this
time but the fight is not over
The results are in and, in the latest match up between activists and
executive management, Waddell & Reed CEO Henry Herrmann scored one for the
As reported earlier, Waddell & Reed, a staunch opponent of say-on-pay for
the past several years, took a new approach to their vote-no campaign this
proxy season. In an effort to block a say-on-pay proposal sponsored by
activist fund Boston Common Asset Management, the company included in its
proxy materials a letter from the CEO urging investors to vote against the
resolution. The rather alarmist letter warned shareholders that, if enacted,
say-on-pay could seriously jeopardize their investment.
Interestingly, the company would not disclose the results during the April 7
annual meeting, which reportedly lasted a mere 20 minutes, so investors had
to wait until the
8-K was filed to discover Herrmann won the round: roughly 58 percent of
votes were cast against the resolution.
What impact Herrmann’s letter had is unclear. The company’s largest
shareholders are institutions, which, as Dawn Wolfe, associate director of
ESG research at Boston Common, points out often vote with management. ‘The
resources in terms of management time and shareholder money put into filing
and distributing the letter remain a waste in our mind,’ says Wolfe.
That said, however, the say-on-pay resolution received fewer votes this year
than it did last year. As Waddell assistant vice president of investor
relations Nicole McIntosh explains it, ‘The shareholder vote on April 7
indicates their [investor] trust in our process and that a say-on-pay
proposal is an unnecessary step.’ This may be true, but Wolfe is quick to
remind people that the proposal still received support from 42 percent of
votes, a significant level of support.
Speaking of Waddell’s compensation process, Wolfe mentions that ‘The
Corporate Library has consistently highlighted Waddell & Reed’s executive
compensation policies and practices as a high concern for investors. For
example, according to the Corporate Library, CEO Henry Herrmann’s non-equity
incentive plan more than doubled in 2009 despite a 15 percent decline in
operating income from fiscal year 2008 to 2009.’
‘Implementing an advisory vote would encourage the board to better explain
to shareholders why this pay package is warranted,’ she continues. ‘Boston
Common Asset Management and other filers will continue to press for reform
at Waddell & Reed that encourages improved communication with shareholders.
It is clear that Waddell management is a laggard in this area and there is
much room for improvement.’
Indeed, it seems Waddell will not be getting a break from shareholders any
time soon. Herrmann received nearly 37 percent withhold votes, and two other
board members, including the chair of the corporate governance committee,
each received 41.5 percent withhold votes. ‘The significant number of
withhold votes is most likely related to the company’s adoption of a poison
pill that was not put to a shareholder vote,’ explains Wolfe.