April 2011- Update: Say on Pay, Independence Provisions, and “If ISS Goes Negative, Don’t Panic”
Update: Say-on-Pay and Say-on-Frequency
Say-On-Pay
As of April 11, 2011 there have been five companies that have failed the say on pay vote by shareholders: Jacobs Engineering (45.5%), Beazer Homes (46.1%), Shuffle Master Inc. (44.5%), Hewlett-Packard with a vote of 50 for and 48 against, and the most recent was Ameron International Corporation (41.7%). Two other companies came close to failing the vote: Hemispherex Biopharma, Inc. (51.3%) and Headwaters Inc (54.2%). In all, 93% of company shareholders have voted for their company’s executive pay policies.
As we review the “no” vote for Ameron International, the most recent of the failures, the trend seems to continue to be that if you have an three-year TSR that is low compared to your peers and your CEO is getting a pay raise, it would appear there is a disconnect between pay and performance. This three-year TSR to CEO pay is a measurement that ISS is utilizing when they make their recommendations. The case of Hewlett-Packard is a highlighted one, as the issue is mostly surrounding the severance payments to the CEO.
Say-on-Frequency
As of April 11, 2011 approximately 56% of company shareholders still prefer annual votes while 39% prefer triennial voting and 5% biennial. These results are similar to what was reported two weeks ago.
Dodd-Frank Update: Proposed Compensation Committee and Compensation Consultant Independence Provisions
by Todd Henke (Director) and Carmen Solorzano (Senior Consultant)
On March 30, 2011, the Securities & Exchange Commission (“SEC”) proposed new rules implementing Section 952 of the Dodd-Frank Act relating to compensation committee independence, disclosure requirements for selecting compensation consultants, legal counsel and other advisors, the rights of compensation committees to retain such advisors, and disclosure of conflicts relating to the work of compensation consultants and other advisors.
“If ISS Goes Negative on Your Advisory Compensation Vote Request: Don’t Panic!”
by Francis Byrd, Senior Vice President of Laurel Hill Advisory
This is an interesting piece from Francis Byrd, an expert on Corporate Governance with Laurel Hill Advisors, released through his e-newsletter ByrdWatch. Most notably, Byrd writes that if ISS does release a negative vote recommendation the first two actions any organization should take is to strategically communicate with specific shareholders, and to promptly respond to ISS why the company disagrees with the recommendation.
Here is the link to the entire article.
