April 19, 2012

Say-on-Pay Failures: #3 and #4

Over the past week, Citigroup (45%) and KB Home (46%) joined the club of those failing to gain majority support for its say-on-pay. A list of the Form 8-Ks filed by the “failed” companies is posted in our “Say-on-Pay” Practice Area. Citi has not yet filed its Form 8-K reporting the voting results – but did address the failure in its “Citi Blog” (which oddly has no comments after this CEO pay entry). The Citi failure was front-page news for the WSJ, NY Times, etc. and I spoke at an event in NYC last night and it was the hot topic (besides the JOBS Act).

Here’s something that Mark Borges blogged last night: The shock waves from yesterday’s Citigroup “Say on Pay” vote continue to reverberate. For an insightful analysis of how to interpret the vote, see Professor J. Robert Brown’s latest post at his website “The Race of the Bottom.”

This turns out to be Citigroup’s fourth “Say on Pay” vote since 2009 – the first two were as a participant in the Troubled Asset Relief Program. I took at look at the support for the company’s executive compensation program over this entire period, which went from 82% in 2009, 89% in 2010, and 93% in 2011 to just 45% in 2012. So it appears that there was a fairly consistent level of support for the program, which spiked in 2011 (the second consecutive year in which the company’s CEO received essentially nominal compensation – $1 in 2010 and $128,000 in 2009) before the bottom fell out.

Still, it’s difficult to understand how this happened – or whether the company saw it coming, particularly when you look back on its Item 402(b)(1)(vii) disclosure from this year’s Compensation Discussion and Analysis:

As part of the process for making incentive awards to the named executive officers for 2011, the committee considered the most recent “say on pay” non-binding stockholder advisory vote held in April 2011 regarding the named executive officers’ 2010 compensation. The resolution approving 2010 executive compensation received a 92.9% favorable vote. Several key features of the 2010 program for named executive officers are carried forward to this year, such as substantial deferred amounts, performance-based vesting of certain deferred incentive awards, a four-year deferral period, significant stock awards that are subject to clawbacks and a stock ownership commitment, and limitations on perks. To better understand the reasons for the favorable say-on-pay vote and potential stockholder concerns for 2011, management engaged in stockholder outreach at various times during 2011 to discuss executive compensation in the context of Citi’s sustained profitability. In particular, management sought a better understanding of stockholder views on Citi’s disclosure and compensation processes and the priorities of our investors. The committee considered the outcome of the most recent say-on-pay vote and stockholder perspectives generally as factors in the 2011 compensation process in addition to currently applicable regulatory requirements, market considerations, and company and individual performance.

Learning Thru Improv

In this podcast, Tommy Galan of The Peoples Improv Theater discusses how you can learn thru improv (here’s how you can learn more about earning CLE through improv), including:

– How do your improv workshops work?
– What are the benefits of using improv to earn CLE?
– Have you ever done an improv workshop at a law firm?
– What’s the funniest moment that has transpired at one of your workshops?

Finally Got to See My Launch (Sort Of)…

When you work in-house, you wind up working on some funky stuff. Back in what now seems like a lifetime ago, I was in-house at Lockheed Martin and besides the typical securities & disclosure stuff, I supported the Treasury function. One of the coolest things I worked on was a synthetic sale-leaseback for a spaceport down in Cape Canaveral, home of the Atlas V rocket. The law firm expert in complicated sale-leasebacks said it was the most challenging deal she ever worked on.

Anyways, after the deal closed, I was invited down to watch a space shuttle launch but I was always too busy to make it. One of my life’s true regrets because I heard many stories about how it was one of the wonders of the world. Don’t feel bad for me though, I received some very nice closing gifts including this framed set of pictures (including one showing the demolition of the old spaceport – that was a community event when they did it, like when Vegas blows up one of its old hotels) – see below. The happy ending is that my office rocked off its hinges a few day ago when they flew the Space Shuttle to it’s new home in the Smithsonian’s Air & Space museum out near Dulles airport. Wow!

New “Deal Cube Gallery”: Email me photos of your coolest – and most tacky – deal cubes or other deal momentos as I will place them in a new “Deal Cube Gallery” on this site and run a competition allowing folks to vote. You will remain anonymous as a source if you so wish.


– Broc Romanek