Governance Center Blog

Jul
18
2011

Derivative Lawsuits on Radar of Failed SOP Vote Companies

If you sit on the board of any of the 39 companies that had a failed Say on Pay vote the past proxy season, I don’t need to tell you that despite the fact the votes were only “advisory” there will be some shareholder repercussions. In the past year, seven companies have already faced one of those repercussions – the dreaded derivative shareholder lawsuit.

It’s possible the plaintiff’s bar may not limit their targets to companies with failed SOP votes; the word is that any vote below 70 percent is troubling. And in some cases compensation consultants have been named as defendants.

At last check, the companies facing derivative lawsuits from shareholders after negative SOP votes include:

  • Occidental Petroleum (2010)
  • Keycorp (2010)
  • Beazer Homes (2011)
  • Umpqua Holdings Corp. (2011)
  • Jacobs Engineering Group (2011)
  • Hercules Offshore Inc. (2011)
  • Bank of New York Mellon (2011)*

*=It should be noted that BNY Mellon is the only company to be sued following a successful SOP vote. Read the rest of this entry »

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Jul
14
2011

Say on Pay Review: More Shareholder Engagement, but Pay for Performance ‘Disconnect’

The early word on what U.S. public companies should do following the first mandatory year of Say on Pay is to review the level of engagement with shareholders vs. the level of support the company received on the advisory vote.

Depending on what you read or who you talk to, the word is that companies and their boards should ascertain the power of proxy advisory firms recommendations and whether or not there is a “disconnect” on pay for performance. Those are two issues that have come up in at least two post-proxy season reports and a Webcast. Read the rest of this entry »

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Jul
07
2011

Wilcox: Decrease in Shareholder Activism, Low Negative Say on Pay Votes Sign of Progress

What you see isn’t necessarily what you get when it comes to the 2011 proxy season, according to John Wilcox, chair of international corporate governance consulting and advisory firm Sodali Ltd. Specifically, in a recent Webcast Wilcox warned viewers not to be deceived by the perceived decrease in shareholder activism and low rate of negative advisory executive compensation, or Say on Pay, votes this year.

“While it is true that shareholder activism is at a lower level in 2011 than last year [according to FactSet’s SharkRepellent, 44 proxy fights have been announced as of April 27 compared to 88 in April 2009],” Wilcox told Alan Rudnick, program chair of The Conference Board Directors’ Institute during the June 29 Webcast [Registration required; free to Conference Board members]. “This can be interpreted as a sign of failure. We should look at it in a different way. Actually, this should mean that communication between shareholders and companies is improving. It might mean they have resolved their differences.” Read the rest of this entry »

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Jun
21
2011

Investors May be More Equipped with Exec. Comp., Pension Data for Proxy Season 2012

With the first year of mandatory advisory votes on executive compensation just about complete, one of the most influential proxy advisory firms announced a new tool for investors and a proxy research firm has communicated that it is concerned about CEO pensions as it relates to governance risk ratings.

Institutional Shareholder Services on Monday in a press release said that it has launched an executive compensation database service for its clients. On the surface, it just sounds like another offering from “the leading provider of corporate governance solutions to the global financial community.” But knowing the cynics in many boardrooms, they will most likely see this as an aggressive move from a firm that while it is in the information business they don’t believe the firm is known for producing very accurate information.

In fact, the ISS head of global research apparently took that criticism into account as she announced the reason for the new service. Read the rest of this entry »

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Jun
14
2011

Governance Center Crash Course: Shareholders Focused on Executive Compensation, Diversity

During our recent Corporate Governance and Compliance Crash Course, we had the opportunity to hear from three key people at three of the largest institutional investors who gave us their take on some of the most important governance/shareholder issues.

While it is not our policy to attribute what is said at these events, we thought it was worth sharing the unattributed comments to the public so as to elicit conversation on these issues at such a critical time in corporate America’s history. If you are member of The Conference Board Governance Center or attended the Crash Course, you will receive a Key Notes publication over the summer that will provide a synopsis of the course.

Here are some comments on the most dynamic issues brought up at the Crash Course preceded by the questions that elicited the response: Read the rest of this entry »

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Jun
10
2011

The Conference Board Webcast: Say on Pay About Substance, Not Election

By now, you’ve probably seen all the figures related to the first year of Say on Pay and Say When on Pay votes for public U.S. companies as mandated under the Dodd-Frank Act. But do you know why investors voted the way they did and what companies should be doing to gear up for the second year, which could include shareholder proxy access?

Well, we at The Conference Board Governance Center got some of those answers earlier this week during the first of a three-part Webcast series called the 2011 Proxy Season: Conversations with Shareholders. Naturally, the first session focused on executive compensation. Joining our Directors’ Institute Program Chair Alan Rudnick on June 8 were Arthur H. Kohn, partner at Cleary Gottlieb Steen & Hamilton LLP; Stephen L. Brown, director and associate general counsel for TIAA/CREF; and James F. Reda, founder and managing director of James F. Reda & Associates LLC. To see the archived version of the first Webcast, click here to register or contact me at gary.larkin@conferenceboard.org. Read the rest of this entry »

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Jun
02
2011

In First Year of Say on Pay, Is Shareholder Dialogue Progressing?

The fact that as of June 1, 31 companies out of more than 1,600 have reported shareholders have voted down executive compensation plans (of those a majority are small- and mid-cap companies) doesn’t begin to tell the story of the first year of SEC-mandated Say on Pay advisory votes.

That’s because the real story is what are boards, management and shareholder learning from the whole experience. That is to say, is there any real dialogue taking place between the companies and shareholders other than the required SEC filings? Based on some early anecdotal evidence and one study done by Semler Brossy Consulting Group, there is some dialogue. Read the rest of this entry »

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May
10
2011

More Evidence that Executive Pay Practice Change is Starting

Now that two other major news organizations have confirmed it, I guess it can be proclaimed that indeed CEOs of American public companies received sizable compensation raises in 2010. In the past week, both the Associated Press and Wall Street Journal reported that U.S. CEOs made more than $9 million (median) in 2010, a jump of more than 10 percent from 2009.

But the bigger takeaway from these reports, specifically that of the Wall Street Journal and the Hay Group, is that while executive pay is going up, a growing number of companies are dropping perquisites (perks) and more companies are aligning pay with performance. The Conference Board, which convened a task force on executive compensation in 2009, is pleased to see some progress on such issues because they represent two of the five guiding principles the task force established. Read the rest of this entry »

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May
04
2011

Occidental’s Fifth Analyst Call Raises Shareholder Dialogue Bar

It was only a year ago that Occidental Petroleum made some big news when it was among the first U.S. companies to have a “Say on Pay” proposal voted down by its shareholders. This year, the company reportedly is the first to hold a so-called “fifth analyst call” with about 50 shareholders prior to this year’s annual meeting on May 6.

By now, most in the corporate governance space have become familiar with the fifth analyst conference call – a call conducted by directors of a public company with key shareholders to discuss issues in the current proxy statement held just before the annual meeting. The name points to the fact that the call is the fifth of the year following the four quarterly calls a company holds with equity analysts. One of the differences with the fifth analyst call is that directors get to converse with a wider array of investors than they had in the past. Read the rest of this entry »

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Apr
29
2011

Early Returns on Executive Compensation: Higher Pay, More Shareholder Involvement

In the first year of mandated advisory votes on executive compensation plans, two observations can be made: large public companies are shifting pay practices toward pay for performance and CEO compensation at most non-banks is back to the higher pre-financial crisis levels.

On one hand, an argument can be made that since the recovery — as tepid as it is — has begun, companies are more apt to go back to the old ways of exorbitant executive compensation. On the other hand, an argument can be made that the higher compensation reflects higher performance by those companies and that there is focus on pay for performance, where there wasn’t before. Read the rest of this entry »

Posted by at 11:59 AM | 6 Comments »

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