February 5, 2009
Dear Colleagues in the
Business Community involved in
Advisory Vote Discussions:
As you know, Walden
Asset Management is actively involved in promoting the Advisory Vote on
executive compensation. In addition, I also served as co-chair of the
Working Group on the Advisory Vote so I have been deeply involved in this
issue for the last several years.
I write with a sense of
urgency as the issue of executive compensation is on the front pages of
our newspapers and floods our airwaves as never before.
Proposed “solutions to
the executive pay issue” now range from the reasonable to the zany, from
small specific reforms to large systematic changes. I am sure some of
these “solutions” are causing tremendous angst among many in business
dealing with compensation as new Congressional legislation is discussed or
Treasury Department regulation is promulgated.
Some of these changes
are moving so swiftly that they don’t offer time for rationale dialogue
about the implication.
Obviously, a series of
missteps by some companies and business leaders have prompted a populist
urgency that new solutions need to be enacted and enacted now. Certainly
the context for discussing new steps regarding executive compensation has
changed significantly in the last 2 months, and even within the last week.
With this backdrop, I
write to urge you to reconsider your position on the Advisory Vote.
Business leaders have raised a number of concerns about the Advisory
Vote. Proponents have worked hard to respond as best they could to many
of these stated concerns, sometimes successfully, sometimes with
continuing quizzical responses from some company management and Boards.
However, it seems clear
that the Advisory Vote increasingly fills the space of a moderate,
reasonable response to the executive compensation issue and is not the
fringe proposal it was perceived to be 2 or 3 years ago.
Other reforms like
clawbacks, golden parachutes, golden coffins, even salary caps, are now
front and center in the compensation debate.
I believe the time has
come for businesses to embrace and put the Advisory Vote into effect. The
business case for companies to move in that direction is orders of
magnitude stronger today than even a few months ago when you received your
Points worth considering
Treasury Department’s position on TARP recipients putting the Advisory
Vote in place and their stated goal of moving toward the Advisory Vote
with all companies. We have a clear government policy direction stated.
The handwriting is on the wall!
businesses individually or through industry associations, such as the
Chamber of Commerce or Business Roundtable, are seen to be lobbying
strongly against the Advisory Vote or trying to hold back the inevitable
tide for the Advisory Vote, it will result in further public relations
backlash. The public will be further outraged if companies attempt to
block reasonable reforms on executive compensation. While that may not be
the way you see it, I believe this will be exactly the way it will play in
the press and the public relations results for companies will be
problematic at best.
growing public support and private acceptance in the business community
that the Advisory Vote is reasonable, middle-ground and is inevitable.
Hewlett-Packard, Occidental Petroleum and Intel recently endorsed Say on
flexibility in what a company can put in their proxy statement for a
shareholder vote. Proponents are open to withdrawing the resolution for
companies that commit to starting the Vote in 2010 and certainly support
companies crafting their own language for the proxy.
companies have expanded their communications effort with investors to both
communicate their philosophy and changes in compensation practices and to
gather input and perspective from investors. This will be extremely
helpful in evaluating the level of shareowner support for and confidence
in the compensation philosophy and disclosure when a vote occurs.
In summary, the pendulum
is swinging toward the inevitability of the Advisory Vote. I write to
urge your company and Board to embrace the Advisory Vote as a fair,
middle-ground approach that will help gain credibility and support in the
investor community and to step back from the traditional statements of
opposition in your proxy. The timing is right for a shift in position by
your company and others.
Senior Vice President