February 9, 2011
Say-on-Pay: A Second Failed Vote in the First Two Weeks of Annual Meetings!
Yesterday, Beazer Homes USA filed this Item 5.07 Form 8-K which revealed that it has become the second company to fail to receive majority support for its say-on-pay, with 54% voting “against.” As I blogged before, Jacobs Engineering became the first last week. That’s two failed votes out of roughly 30 SOPs voted upon so far – nearly a 7% rate.
In my poll last week – in which folks guessed how many failed votes there would be this year – zero picked 1-2 failures; 4% predicted 3-4 failures; 18% predicted 5-10 failures and 75% predicted more than 10 failures (5% said “what me worry?”). At the current 7% rate of failure, it looks like the smart money will have pegged it.
I’ve been amused by some who have recently reported that only 1 out of 20 have failed so far – as if a 5% failure rate was a good thing – and that’s not even counting the companies who have garnered a significant “against” vote like Monsanto and Johnson Controls. If you apply that failure rate to the number of companies that will hold SOP votes soon enough, the image is scary.
As Paul Hodgson blogged last year, 500 nays-on-pay would be the result extrapolating from the 3 failures last year out of the 60 companies that voluntarily had say-on-pay on their ballot. And as Paul noted, “Can you imagine what might happen if shareholders got organized? [FX: Long, slow, whistle on descending note….]”
Interestingly, a member brought three smaller companies to my attention that filed proxy materials after the effective date of Dodd-Frank’s SOP provision – but before the SEC postponed the applicability of SOP to smaller reporting companies. Given that the SEC hadn’t signaled the postponement beforehand, they certainly got lucky! Of course, given that they didn’t even know that SOP had applied to them, they likely don’t even know they are lucky…
Shareholder Proposals: Corp Fin Reveals Approach to Proxy Access Proposals During Stay
In this response to General Electric, the Corp Fin Staff tips its hand about how it intends to approach shareholder access proposals during the current stay of the challenge to the proxy access rule (ie. Rule 14a-11). This response is an interesting example of how the Corp Fin Staff is explaining its decisionmaking these days as the Staff indicates that it’s granting relief based on the way that Rule 14a-8(i)(8) operated prior to the shareholder access rulemaking. Probably the right answer, but one that had not yet been addressed to my knowledge.
Yesterday, the SEC celebrated bringing charges regarding expert networks by affixing a special logo dedicated to the event on its home page. That is a first. Wonder what the logo for adopting the say-on-pay rules would have been? Maybe this one…
Pat McGurn’s Forecast for 2011 Proxy Season: Wild and Woolly
We have posted the transcript for our recent webcast: “Pat McGurn’s Forecast for 2011 Proxy Season: Wild and Woolly.”
– Broc Romanek