May 26, 2009

Carpenters Push Triennial Alternative for Say-on-Pay

One of those things I’ve been meaning to blog about – and no one else was blogging about until Mark Borges covered it in his blog recently. A few weeks ago, Ed Durkin and the United Brotherhood of Carpenters Pension Fund has submitted a new shareholder proposal to 20 companies seeking a triennial vote on pay rather than an annual one. The rationale is that this would help shareholders by reducing the number of companies they would have to analyze each year – and would help companies as they wouldn’t have to face an annual battle over their pay practices.

As Mark notes, the triennial executive pay (known as “TEP”) proposal would require:

– In addition to an overall vote on named executive officer compensation, separate votes on a company’s (i) annual incentive plan, (ii) long-term incentive plan, and (iii) post-employment benefits (including retirement, severance, and change-in-control payments); and

– A “forum” between the compensation committee and shareholders on at least a triennial basis to discuss senior executive compensation policies and practices.

In talking to company representatives, they obviously find a vote every three years (with a forum in between periods) more palatable than an annual vote (eg. Intel recently launched a stockholder forum leading up to last Wednesday’s annual shareholders meeting).

I agree with Mark that this idea’s weakness is how to deal with corporate implosions between the triennial votes. My solution would be a safety valve where shareholders could gather and trigger a vote, much like the idea of triggering proxy access. In other words, if a group of shareholders got together that met a ownership threshold and filed some type of certification with the SEC that states they seek a say-on-pay vote (with the filing made by a particular deadline), the company would be forced to put say-on-pay on the ballot for the upcoming meeting.

But note that I’m still dubious whether say-on-pay is really meaningful anyways. I would rather rely on votes “against” compensation committee members as the signal to the board that shareholders are unhappy over pay practices. In a say-on-pay world, I worry that board will routinely get their pay packages blessed (see this recent WSJ article) and that excessive pay practices won’t change.

Welcome to Barbara Nepf!

We’re very excited to have Barbara Nepf join our staff! Most recently, Barbara worked for DLA Piper as a Knowledgement Management lawyer, specializing in all those areas that you find on this site. Barbara will be working part-time from the NYC area. Give her a “shout out” at

Spring Issue of the Compensation Standards Newsletter

On a complimentary basis, we recently posted the Spring Issue of the Compensation Standards Newsletter. The lead article is entitled “Compensation Arrangements in a Down Market: Insights into Latest Practices.”

Please note that we also have posted all the archives of this publication for members to access.

– Broc Romanek