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December 3, 2010 Forum Report:

Comments on Frequency of "Say on Pay" Voting



Forum Report: “Say on Pay”


Comments on Frequency of "Say on Pay" Voting


Referring to this week's report of views concerning the choice of frequency for "Say on Pay" voting, Ed Durkin of the United Brotherhood of Carpenters ("UBC") has provided a copy of his memorandum arguing for proxy advisor adoption of a policy supporting the "triennial" practice he has advocated:[*]


Mr. Durkin bases his position primarily on his belief that triennial voting would allow more careful investor consideration of company-specific issues and lead to more effective communication between investors and corporate managers, as explained in these selections from his memorandum:


It is our concern that ISS' proposed default recommendation for an annual say-on-pay vote does not advance the most effective formulation of the say-on-pay vote, in that it promotes the quantity of say-on-pay votes over the quality of such votes. The ISS overview piece states that the say-on-pay vote "is at its essence a communication vehicle, and communication is most useful when it is received in a consistent manner." We believe that the "most useful" communication vehicle would be an informed vote based on thorough and comprehensive pay plan analysis. An annual vote at thousands of companies would challenge the ability of large institutional investors to undertake a thorough analysis of portfolio companies' pay plans or an appropriate review of the vote recommendations of their advisory firms. The quality and thoroughness of the pay plan analysis supporting say-on-pay votes, not their frequency, will determine the usefulness of the vote in improving executive compensation. [page 2, paragraph 1]


Our view is that a periodic say-on-pay vote could be a valuable part of a complementary set of advocacy tools that include company-investor dialogue, shareholder proposals, equity and incentive plan votes, and, if warranted, votes AGAINST director nominees. The ISS proposed annual default voting guideline on say-on-pay frequency votes may undermine the development of a thoughtful and effective executive compensation advocacy system. ...While it may be counter-intuitive for a proxy advisor firm to suggest fewer shareholder vote opportunities, in this instance, less is more. Less frequent say-on-pay votes will allow for more comprehensive and thorough plan analysis, more informed voting, more effective advocacy, and ultimately more effective executive compensation reform. [page 3, concluding paragraph]


            Comments of Forum participants will be welcomed, on Mr. Durkin's views and on other issues relating to the implementation of "Say on Pay" voting.

GL – December 3, 2010


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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