Forum Report: “Say on Pay”
Defining the New Rules for Shareholder
Last week’s expected action by the SEC to propose rules for TARP recipient
implementation of “Say on Pay”
was accompanied by support for the types of investor communications and
information that Forum participants have consistently advocated as a
foundation for sound, long-term corporate performance.
All of us should appreciate this recognition of informed professional views
in the formulation of historically important public policies, and be
encouraged by the continuing opportunity to help define effective
marketplace practices on which a healthy economy can be built.
Your suggestions will be welcomed during the next week to prioritize issues
and guide Forum plans for supporting projects. Preliminarily, these are
three of the subjects that may justify our attention:
SEC rulemaking: The SEC has invited comments on its proposed rules
for TARP recipient implementation of “Say on Pay” processes.
While these rules are to be applied only to TARP recipients, it can be
assumed that they will serve as a model for any more broadly applied rules
and marketplace practices. Many Forum participants therefore consider it
important to make good use of whatever we’ve learned – or can learn – in
this year’s definition of TARP processes.
Information requirements: Both corporate and investor
decision-makers will need more information to support their policy
development, reporting, analysis, and voting in relation to compensation
issues. The sheer quantity of this additional information will require
significant improvements in the efficiency of the data sourcing and
research processes. And, as many of you have observed, the inevitable
concern about cost management must be balanced by support for both the
quality and diversity of research, so that we do not end up with a
bureaucratized voting function that defeats the essential purpose of “Say
Shareholder communications: Making good use of “Say on Pay” and
other SEC-supported processes will require the development of alternatives
to the shareholder communication rituals that were based on paper mailings
and annual meetings. Several Forum participants are actively considering
or testing alternatives, including the enabling technologies. We have
also been exploring arrangements for partnering to develop communications
processes that can be broadly used by Forum participants.
Please let me know what is important to you, and what you think will be
important to your fellow marketplace decision-makers.
GL – July 8, 2009
Lutin & Company
575 Madison Avenue, 10th Floor
New York, New York 10022