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January 9, 2009 Forum Report:

Inviting Comments on Gordon Proposal of Shareholder “Opt-In” Right to “Say on Pay”

(updated January 19, 2009)


For a summary of discussions of the proposed "opt-in" right that Professor Gordon introduced at the Forum's December meeting, see the "Regulatory Alternative" section of the following report:

For the original draft of Professor Gordon's paper and comments of Forum participants, see:

For the subsequently published version of the paper, see



See comments:

C. William Jones, January 21, 2009

Peter C. Clapman, January 22, 2009

Lynn Turner, January 28, 2009

Timothy Smith, January 30, 2009

Deborah Gilshan, February 4, 2009

Leonard Rosenthal, February 11, 2009

Douglas K. Chia, February 17, 2009

See also

Richard V. Smith, January 30, 2009 posting in Advisor's Blog



Forum Report


Revised Gordon Draft of “Say on Pay” Policy Alternatives

Professor Gordon has revised the draft presented to Forum participants on January 9th for your comments on his review of “Say on Pay” policy alternatives, including his proposed shareholder “opt-in” rights.  Continuing to invite your comments, he summarizes his preliminary changes as follows:

The additions to this draft buttress the alternative proposal to limit any mandatory SoP rules to the largest firms by showing that the UK precedent itself makes such a distinction: firms listed on the LSE Main Market (1080 firms) are subject to mandatory SOP whereas the smaller firms listed on AIM (1546 firms) are not. In comparing institutional capacity to manage SoP responsibilities, it is also noteworthy that in the UK, 82 companies account for 85% of market capitalization, whereas in the US, the S&P 500 companies account for only 75%.

The revised draft is available subject to the same understanding that this, like previous drafts, is not a published paper and should be treated accordingly:

    Jeffrey N. Gordon, Columbia Law School, January 18, 2009 draft for publication in Harvard Journal on Legislation: “‘Say on Pay’: Cautionary Notes on the UK Experience and the Case for Shareholder Opt-In” (31 pages, 686 KB, in PDF format)

You will note, incidentally, that the final version of this paper is expected to be published in the Harvard Journal on Legislation.

Forum participants who want to offer views that will be considered by Professor Gordon as well as by policy decision-makers are encouraged to submit their comments, either privately or for open Forum review.

           GL – January 19, 2009


Gary Lutin

Lutin & Company

575 Madison Avenue, 10th Floor

New York, New York 10022

Tel: 212-605-0335


[January 9, 2009 distribution]


Forum Report


Inviting Comment on Gordon Proposal


Shareholder “Opt-In” Right to “Say on Pay”

Jeffrey Gordon has provided a draft of the paper he promised at last month’s Forum meeting, explaining the idea he introduced then for a federally legislated shareholder “opt-in” right to require “Say on Pay” voting on a company-specific basis:

    Jeffrey N. Gordon, Columbia Law School, January 8, 2009 draft: “‘Say on Pay’: Cautionary Notes on the UK Experience and the Case for Shareholder Opt-In” (30 pages, 681 KB, in PDF format)

This is Professor Gordon’s summary for Forum participants, who are again invited to comment on the draft:

The paper provides a sober look at how a theoretically attractive idea like SOP is likely to play out in the real world,  with two particularly important takeaways:

     First, SOP is likely to promote a trend toward "one size fits all" compensation practices, when we've just learned a) that stock options, promoted as the "one size fits all" solution to incentive alignment issues, can work out very differently – even disastrously – across some business sectors and firms and b) have come to appreciate the systemic risk involved in rapid roll out of conventional wisdom about best practice.

     Second, SOP is likely to magnify the influence of proxy advisory services, who will be rating firm-specific compensation practices, when we've just learned the risk of empowering and relying upon rating agencies, particularly where consulting is tied to rating.

In the face of recent lessons, it seems especially unwise to mandate SOP across all 14,000 public firms in the United States.  A better approach is to provide federal assurance of the shareholder right to opt-into a SOP regime.  This will lead to targeting of firms with the most problematic compensation issues and will reflect commitment of genuine shareholder engagement rather than delegation of decisionmaking to a third party rater. It will also lead to testing and rethinking of compensation ideas in a more thoughtful way.

You’ll see that this new draft refines many of the observations in the July draft that Professor Gordon had offered for Forum comment.  You’ll also see that, aside from supporting the proposed “opt-in” alternative, the paper’s comprehensive and thoroughly researched review of the broader “Say on Pay” issues can serve as a definitive reference for decision-makers and advocates of all views.

Your views of both the proposed “opt-in” alternative and the broader issues addressed in the paper will be appreciated.  Like Professor Gordon’s previous draft, this is not a published paper and should be treated accordingly; anyone wanting to refer to its statements should seek permission from the author.

           GL – January 9, 2009


Gary Lutin

Lutin & Company

575 Madison Avenue, 10th Floor

New York, New York 10022

Tel: 212-605-0335





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.

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