January 7, 2011

Poll Results: Say-When-on-Pay Recommendations

I blogged this yesterday on’s “The Advisors Blog“: Earlier this week, I conducted my own informal poll on Blog regarding what say-when-on-pay recommendations companies will choose for this proxy season. The results fell in line with what I predicted – “annual” was the most popular despite the limited experience of companies filing proxies so far mostly going with triennial. My poll results came in at: 50% annual; 4% biennial; 33% triennial; 4% no recommendation. Compare that with the 71 companies who had filed proxies by the end of the year: 11% annual; 24% biennial; 55% triennial and 10% no recommendation.

On Wednesday, Towers Watson released its own poll results on this topic – and I’m happy to say that the results are quite similar to my own poll results. Here is an excerpt from their press release:

Conducted in mid-December, the Towers Watson poll of 135 U.S. publicly traded companies found that 51% of respondents expect to hold annual say-on-pay votes, while 39% prefer the vote be held every three years, and 10% anticipate holding biennial votes. The poll, however, found companies have a range of reasons for favoring a particular voting frequency. Four in 10 respondents cited accountability to shareholders and a desire to minimize administrative burdens as factors having the greatest influence on their vote-frequency recommendation, while slightly fewer cited shareholder preferences, proxy advisor policies and providing shareholders with an avenue to express concern about executive pay without casting negative votes on other matters as key factors.

“Clearly, there’s no single right answer to the question of how frequently these votes should be conducted that will work for every company,” said Towers Watson senior consultant James Kroll. “Each company seems to be assessing its own circumstances and needs, taking into account its specific shareholder composition and the degree of potential shareholder concern about the company’s executive pay programs.”

The survey also found that nearly half (48%) of surveyed companies are making some adjustments to their executive pay-setting process in preparing for the upcoming proxy season, although many companies have already strengthened their processes in recent years in light of growing shareholder activism and intensifying scrutiny of pay issues. Among those making further changes in preparation for the 2011 proxy season, 65% are devoting more attention to explaining their programs in the Compensation Discussion & Analysis (CD&A), 41% are performing additional analyses on the link between their executives’ pay and company performance, and 30% have made or are considering changes to programs such as severance, change-in-control benefits and perquisites that have high visibility.

Somewhat surprisingly, almost half (49%) of the respondents don’t know what level of favorable shareholder say-on-pay votes will be considered a successful outcome by their boards, and only 8% of the respondents have a process in place for analyzing the results of the vote and developing appropriate action plans in response to potential shareholder concerns. Of those companies that have defined how they will evaluate success, most believe that a favorable shareholder vote of at least 80% would be considered successful.

More on “The Facebook and Goldman Saga: All About Section 12(g) and Section 12(h) Applications”

Yesterday, I finally blogged about the rumors of the SEC investigating secondary markets for private companies and the flare-up over Goldman Sachs creating a special purpose vehicle to allow certain investors to invest in Facebook. As I noted, there was a lot of speculation over whether Facebook should be registering its stock under the ’34 Act despite getting Section 12(h) exemptive relief from Corp Fin back in 2008.

Late in the day yesterday, the WSJ ran this article about Facebook including disclosure in a recent private placement offering memo that states that the company intends to surpass 500 shareholders during 2011. Here is an excerpt from the article: “Some investors have wondered whether the arrangement with Goldman was designed to avoid such disclosures. The document makes clear that isn’t the case, and that Facebook will likely be a publicly traded company in 2012.”

A member sent along this petition for rulemaking sent to the SEC in 2003 that recommends that the SEC create a “Beneficial Owner’s Rule” that would change the definition of “held of record” to include beneficial owners holding the security in “street name.”

Poll: What Did Santa Bring? Corporate Flavored Candy?

One member recently bemoaned that for Christmas, his wife gave him a copy of the new book “Ferdinand Pecora, the Hellhound of Wall Street” and he wondered if other corporate types received similar tokens of affection. Please take a moment for this anonymous poll:

Online Surveys & Market Research

– Broc Romanek