January 31, 2011

Say-on-Pay: A Failed Vote in the First Week of Annual Meetings!

Last year, three companies in the US failed to obtain a majority vote for say-on-pay. That was a surprise to me as I have written about before given that so few United Kingdom companies have experienced failures over their decade of mandatory say-on-pay.

Well, in the very first week of annual shareholder meetings under Dodd-Frank’s mandatory say-on-pay regime, we already have our first failed SOP vote. Late Friday, Jacobs Engineering filed this Form 8-K reporting a 54% “against” vote and a 45% “for” vote (as I hinted in a tweet back then). The company received a negative recommendation from ISS.

It’s not a good sign that so early in the season – out of only a handful of companies having meetings – Monsanto’s say-on-pay vote only received 65% “for” and another company’s vote did not pass. Although it’s still early, this could be a harbinger that SOP results will defy the predictions of those that felt that most say-on-pay votes would easily pass.

In the “ Blog,” Steve Quinlivan notes that Jacobs Engineering’s vote results may be explained by the fact that they filed additional solicitation materials explaining one-time grants they had given to its executives, while the proxy statement “had only a perfunctory overview and the grants were otherwise barely addressed” (additional solicitation materials are often filed after a company receives a negative ISS report and must then actively solicit). Perhaps more disclosure in the proxy statement in the first instance would have helped? Who knows but it wouldn’t have hurt the company. To get up-to-speed on drafting considerations, consider listening to the audio archive of last week’s blockbuster webcast featuring Mark Borges, Dave Lynn, Alan Dye and Ron Mueller (transcript coming later today).

Steve also reports about the difficulty that companies who recommended a triennial frequency in getting support for that recommendation. Of the six companies that have announced voting results so far – only two have received majority or plurality support for a triennial frequency (and each of the two had concentrated holdings).

In his “Proxy Disclosure Blog,” Mark Borges gives us the latest say-when-on-pay stats: with 205 companies filing their proxies, 59% triennial; 6% biennial; 29% annual; and 5% no recommendation.

The Proxy Solicitors Speak on Say-on-Pay

We have posted the transcript for our webcast: “The Proxy Solicitors Speak on Say-on-Pay.”

Poll: How Many Companies Will Receive a “Failed” Say-on-Pay Vote?

Now that say-on-pay is mandatory for US companies – and we’ve already had one failed vote under the mandatory regime – please take a moment to participate in this anonymous poll and express how you read the tea leaves:

Online Surveys & Market Research

– Broc Romanek