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For an earlier report of the contest addressed below from the activist investor perspective, see


Corporate Secretary, April 16, 2010 article


Crossbow logo People on the street

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 home team.

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.

By Katie Feuer




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