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December 9, 2008 Forum Report:

Projects Discussed at Second Open Meeting

Ten Questions

Investor Research Exchange

Regulatory Alternatives

Compensation Database

Investor Surveys



For the reported meeting's agenda and Program Panel members, see



Forum Report


Projects Discussed at Second Open Meeting


The discussions at Thursday’s open meeting focused on the definition of several practical projects that may help both corporate managers and investors benefit from “Say on Pay.”

Objectives for the projects were developed in exchanges of views among meeting participants, establishing a common understanding of the various concerns raised by or in response to the recent Gordon, Johnson, Nowak and Summerfield comments.  Some of these views were reported in an article distributed on Friday.  The resulting observations of marketplace conditions included the following foundations for our consideration of what would be needed:

    Based on the reported experiences of several very large institutional investors with significant research resources, attention requirements to compensation issues can be expected to vary significantly among portfolio companies, with some portion of them requiring meaningful commitments of high-level professional resources to analysis, engagement and decision-making.  These more intensive situation requirements cannot be satisfied by the existing marketplace resources that are designed to provide cost-efficient compliance with routine voting duties.

    Fund managers generally encourage governance analysts to allocate attention to a company based on the importance of either a voting proposal or a performance problem.  This practical triage has not encouraged attention to the examination of practices that appear to support enterprise success, and that might provide valuable examples of positive, marketplace-tested compensation policies.

    Finally, the current economic disorder is at least partly attributable to executives doing exactly what they were paid to do, supported by shareholder votes for compensation policies that were endorsed by self-appointed accreditors of “good governance” expertise.  We must accept the fact that both the compensation policies and the system of corporate governance that evolved over the past couple of decades have clearly failed, and need to be fixed.

Following is a summary of the projects that will be progressing in this context, in the order they were addressed:

A. Ten Questions

The previously reported “Ten Questions” developed by TIAA-CREF[*] are now a thoroughly tested means of focusing both investor thinking and corporate reporting on the essential issue of what a company’s executives are being paid to do, rather than on whether a company is complying with a set of bureaucratically defined rules.  Meeting discussions clearly supported the Forum’s commitment to a project for expanding the use of this approach, either with a broadly accepted standard set of questions or by providing a model for individual investor adaptation.

Observing the mutual benefits of this approach, one of the meeting’s participants suggested that her large, prominent company might want to consider initiating public reporting of its responses to a broadly accepted standard set of questions in its proxy statement or other filings, so that all investors could benefit equally from the information [see note, below].  With indications that there could be widespread interest in this kind of voluntary supplement to SEC-mandated reporting, the Forum will proceed with corporate and investor workshop volunteers to determine what, if any, refinements of the TIAA-CREF “Ten Questions” might be appropriate to (1) satisfy broad investor interests, and (2) allow efficient responses by a broad range of companies.

B. Investor Research Exchange

Several different models for investor sharing of research were discussed during the meeting, including current UK experiments with investor controlled research managers, proposals for US investor collaborations to share costs of consultants, and the establishment of dedicated funds for research support.  There appeared to be consensus interest in continuing explorations of these and other possible forms of research sharing, while proceeding with the development of the “research exchange” approach initiated with TIAA-CREF and Hermes leadership at the first open meeting of the “Say on Pay” program.

The Forum is willing to provide the independent administrative functions required to support an investor “research exchange.”  Suggested conditions of the project included a widely appreciated provision that investors contribute at least one positive report addressing an example of successful corporate practices for each negative report addressing concerns about unsatisfactory performance.

C. Regulatory Alternatives

Following up on the continuing debate about legislated “Say on Pay,” Jeffrey Gordon introduced a new idea for a regulatory alternative that would simply allow shareholders to vote for an individual company’s adoption of advisory voting, possibly with a less-than-majority percentage of votes to be set by Congress or the SEC.  Meeting participants who favored universally mandated SOP were naturally disinclined to support this, but generally recognized the idea’s merits of allowing ready imposition – assuming a relatively low voting threshold – for companies that need it without burdening everyone with voting requirements for companies that don’t need it.

Professor Gordon offered to provide a written summary of the idea, possibly with other observations relating to issues that might be considered by Congress or addressed in the SEC’s adoption of rules to implement any legislation.  His draft, expected in a week or two, will be presented to Forum participants for comment.

D. Compensation Database

Running out of time, there was only a brief summary of the Forum’s project to develop a marketplace-defined, communally controlled database of compensation information.  The purposes of this important project are to (1) provide a standard, reliable set of primary facts on which compensation research can be based, and (2) reduce the costs of data to lower the threshold for research, encouraging the development of qualitatively differentiated competition as well as expanded user analysis.

It was a disappointment to many Forum participants, including me, that we were unable to discuss this project at the meeting.  The members of its workshop have actually made considerable progress in reviewing examples of other professional and industry databases, considering processes for open marketplace participation in the definition process, analyzing XBRL and other technology applications, and considering integrity control processes.  Anyone interested in the database project is encouraged to request more information.

E. Investor Surveys

We were also unable to discuss investor surveys at the meeting before running out of time.  It was briefly reported that the Forum plans to observe the independent Schering-Plough experiment with a proxy-related shareholder survey, and that we expect to be working with at least two large companies and possibly investors during the next couple of months to develop processes for determining shareholder views.


            Please let me know if you have any questions about what was discussed, or about the progress of any of the projects.  Remember that the Forum is open to anyone who wants to participate, either to be informed about your decisions or to offer your views to other decision-makers.  There are important decisions to be made now, and important opportunities to guide the development of viable marketplace practices.


           GL – December 9, 2008


Gary Lutin

Lutin & Company

575 Madison Avenue, 10th Floor

New York, New York 10022

Tel: 212-605-0335



[*] The Forum has referred to the TIAA-CREF model of “10 Questions for Evaluating CD&A's” several times since it was introduced.  For a link to download the questions, see the November 13, 2007 comments of John Wilcox on “Information Requirements for Investor Decisions,” submitted in relation to the Forum’s previous Options Policies program.

NOTE:  The individual who suggested corporate reporting at the December 4th meeting has asked me to report that she had contemplated posting responses to the questions on the company's web site, rather than including the responses in the company's proxy statement or other filings that would involve potentially burdensome reviews of SEC reporting requirements. GL – 12/17/08




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.

The organization of this Forum program was supported by Sibson Consulting to address issues relevant to broad public interests in marketplace practices, rather than investor decisions relating to only a single company. The Forum may therefore invite program support of several companies that can provide both expertise and examples of performance leadership relating to the issues being addressed.

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