April 20, 2011

Say-on-Pay in a Nutshell

With articles appearing now in local papers about Say-on-Pay (here is a representative Baltimore Sun article from over the past weekend), it now seems that the Dodd-Frank mandated Say-on-Pay votes have finally seeped into the public consciousness. It is no surprise then that the SEC’s Office of Investor Education and Advocacy has just put out this slick Investor Bulletin on Say-on-Pay and Say-on-Golden Parachute votes. The purpose of the bulletin appears to be to explain, in neutral, plain terms, what the Say-on-Pay, Say-on-Frequency and Say-on-Golden Parachute votes are all about and why they are turning up in proxy statements this year. Unlike last year’s Investor Bulletin New Shareholder Voting Rules for the 2010 Proxy Season (dealing with the change to NYSE Rule 452 for the election of directors), it doesn’t appear that the SEC or the Staff is encouraging that this Say-on-Pay Investor Bulletin be expressly referenced in proxy statements.

Keep in mind that the Say-on-Golden Parachute voting and disclosure requirements are effective for initial filings made on or after this coming Monday, April 25th. To date, it appears that very few companies have opted to get the “advance” advisory approval of golden parachute compensation by including the Golden Parachute Compensation table and related disclosures in the annual meeting proxy statement so that it is subject to the Say-on-Pay vote. I have only counted five so far, but let me know if you have come across more than that.

Occidental Petroleum to Participate in First “Fifth Analyst Call”

As expected, Say-on-Pay has focused a great deal of attention on the engagement process this year, as companies explore new ways to have an effective dialogue with shareholders regarding corporate governance and executive compensation issues. According to this Dow Jones Financial News article, a group of investors led by F&C Asset Management and Railpen Investors is advocating the use of the “fifth analyst call” as a means for accomplishing effective engagement. The “fifth analyst call” is intended to supplement the four quarterly analyst calls with a call that is focused exclusively on corporate governance matters. The idea is that the call will occur between when the proxy statement is filed and the date of the annual meeting, so that the discussion can be about the corporate governance matters and executive compensation disclosed in the proxy statement.

The article notes that Occidental Petroleum has said that the company’s lead independent director and the chair of the executive compensation and human resources committee will participate in the first such “fifth analyst call,” which is scheduled to take place on April 26th. It remains to be seen whether others will follow Occidental Petroleum in adopting this approach.

For more on the “fifth analyst call” concept, check out this entry by Karen Kane of Karen Kane Consulting on The Mentor Blog.

Understanding Matrixx Initiatives

In this podcast, my colleagues Erik Olson and Stephen Thau of Morrison & Foerster talk about the recent Supreme Court case, Matrixx Initiatives v. Siracusano:

– What is the background of the case?
– What was the Supreme Court’s holding?
– What does this mean for companies going forward?

– Dave Lynn