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For the investor coalition announcement reported in the article below, including a copy of their "Public Statement on Annual Say on Pay," see


Wall Street Journal MarketWatch, February 3, 2011 article



Feb. 3, 2011, 6:00 a.m. EST

Say-on-pay vote gives CEOs early trouble in 2011
Investors reject CEO pay at Jacobs Engineering, send message to Monsanto

By Ronald D. Orol, MarketWatch

WASHINGTON (MarketWatch) — Shareholders at a handful of large companies are sending a loud message to corporate chieftains early on in 2011 that they want an annual vote on the pay packages of top executives at U.S. corporations, rejecting efforts at those companies to only hold those votes once every three years.

So far this year, shareholders at four of seven companies that have proposed a triennial vote at their annual meetings have disagreed with management and instead pushed for a say-on-pay vote every year.

“Based on early polling results, there appears to be a trend towards annual votes,” said Sanjay Shirodkar, Of Counsel at DLA Piper. “In the long-term we’re going to see lots of annual votes.”

Also, votes on the pay packages themselves have received mixed results so far in 2011, with the majority of participating shareholders voting against top executive pay packages at Jacobs Engineering Group Inc. (JEC 52.13, -0.40, -0.76%) , a Pasadena, Calif.-based engineering and construction company with a $6.5 billion market capitalization. The company reported at its Jan. 27 annual meeting that 54% of participating shareholders voted against the company’s executive pay package. Read SEC filing by Jacobs Engineering

Conflicts ahead of shareholders and executives

Most annual meetings are yet to come, but the early votes indicate that there will be a lot of conflict in the months ahead, with shareholders using a new weapon handed to them by the post-crisis Dodd-Frank Act and a rule based on the statute approved by the Securities and Exchange Commission.

The SEC adopted a rule on Jan. 25 that gives investors a nonbinding vote on the pay of top executives at corporations, a provision that is expected to have a transformative impact on the relationship between chief executives and institutional investors — in part because of the embarrassment a company experiences if investors turn out strongly against its executive compensation. Read about new say-on-pay rule

Even a large minority vote to oppose executive top pay can be embarrassing. A large minority of shareholders, 34% of participating shares, voted against top pay packages at St. Louis, Missouri-based agriculture products giant Monsanto Co. (MON 75.44, -0.61, -0.80%) .

“It’s not a good sign that so early in the season - out of only a handful of companies having meetings - Monsanto’s say-on-pay vote only received 65% “for” and another company’s vote did not pass,” said Broc Romanek, editor of The Corporate “Although it’s still early, this could be a harbinger that [say-on-pay] results will defy the predictions of those that felt that most say-on-pay votes would easily pass.”

Despite opposition by Monsanto’s management, 62% of shares voted sought an annual say-on-pay vote, according to a Jan. 25 filing. Only 36% of shares voted to have the vote every three years. In a Jan. 25 press release, responding to shareholders opposition, Monsanto agreed to hold an annual vote on pay.

In its proxy filing on Dec. 10, Monsanto defended its recommendation to have investors vote on pay packages every three years, arguing that a triennial vote would allow shareholders a way to “better-judge” the company’s pay package program in relation to its long-term performance.

“One of the core principles of our executive compensation program is to ensure management’s interests are aligned with our shareowners’ interests to support long-term value creation,” the company wrote.

Time to make nice with the investors

Shirodkar insisted that the vote at Monsanto indicates that executives there need to either change their pay packages or do a better job justifying to investors why their compensation policies make sense.

“It’s a fairly strong message to Monsanto management that they need to look at exec comp packages,” he said. “The compensation committee needs to take a serious look at it.”

Shirodkar added that companies that receive substantial opposition to their recommendation of triennial votes are expected to change their policies and agree to annual votes.

“These votes are a precursor of what we’re going to see for the rest of the year,” he said.

Romanek said he expects corporations to allocate more time and resources for shareholder engagement. “Their skill sets will have to evolve some more. They do deal with investors and do some negotiations, but the board will have to share more power with larger shareholders. This may hasten the change,” Romanek said.

The shareholders at three additional companies followed suit, with the shareholders at Air Products and Chemicals Inc. (APD 89.04, -0.58, -0.65%)   (60% to 39%), Jacobs Engineering (68% to 29%), and Woodward Inc. (WWD 34.66, +0.59, +1.73%)  (57% to 39%) also demonstrating a preference for future votes to be held each year instead of the management’s preference to hold the vote once every three years.

The shareholder advisory firm ISS Proxy Advisory Services, formerly RiskMetrics, appeared to have a big impact on the votes. At both Jacobs and Monsanto, for example, ISS recommended that shareholders reject the pay packages of top executives. ISS also recommended that shareholders have annual votes on pay at Jacobs, Monsanto, Air Products and Woodward.

Also, a group of institutional investors with $830 billion in assets also announced Feb. 1 that they want corporations to have an annual vote on corporate pay packages.

Officials at Woodward, Jacobs and Air Products did not return calls.

Ronald D. Orol is a MarketWatch reporter, based in Washington.

Copyright © 2011 MarketWatch, Inc.




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