April 24, 2013

7th Say-on-Pay Failure of the Year: 1st Company to Fail Twice – But Not in Consecutive Years

As noted in its Form 8-K, Cogent Communications Group is the 7th company holding an annual meeting in 2013 to fail to gain majority support for its say-on-pay (40% support). Cogent also failed in 2011, with 39% support. That makes them the first company to fail, pass (68% in ’12), then fail again. And as noted in its Form 8-K, Biglari Holdings is the 6th company holding an annual meeting in 2013 to fail to gain majority support for its say-on-pay (33% support since abstentions count as “against”). Hat tip to Karla Bos of ING Funds for pointing these out!

Here’s a chart from Steven Hall & Partners of the say-on-pay stats so far this proxy season – and here’s a press release from them showing CEO pay levels are up 7% so far this season…

As always, Mark Borges and Mike Melbinger are doing a great job covering developments in the executive pay area in their blogs. I’m not doing shabby myself as there is more than enough to blog daily on pay issues. See this blog by Mark Borges analyzing a novel proxy statement that breaks lots of new ground…

Another Say-on-Pay Case Dismissed: AAR

Here is a blog by the team at Katten Muchin who worked at getting a say-on-pay case that was filed against AAR Corp. in Northern Illinois dismissed recently. In this blog, Jim Barrall parses the decision – and here is Wachtell Lipton’s analysis.

Stillwater Rescinds CEO Awards after Shareholder Derivative Suit

Mark Poerio of Paul Hastings recently wrote this blurb on (here’s a related Washington Post article):

Mainly to secure exemptions from Code §162(m)’s $1M deduction limit, it is common for stock award plans to establish maximum limits on the awards that any individual may receive. The recent experience of Stillwater Mining reminds that these limits need monitoring, because awards in excess of shareholder-approved plan limits are vulnerable to challenge. In the case of Stillwater Mining, a shareholder derivative complaint made such allegations in early April. Within a week afterward, Stillwater filed a Form 8-K announcing that, with the CEO’s consent, the company had rescinded grants of restricted stock units covering just under 190,000 shares (valued around $2M, @ $11/share).

Two days later, on April 12th, Stillwater filed additional proxy materials providing more context: basically explaining the Code §162(m) origin for the limit, its past irrelevance to the company due to inability to claim deductions, and the conclusion that “Despite the cost to Mr. McAllister personally, the costs and distraction of litigation were not in the best interests of the Company and its shareholders and agreed the most prudent course of action would be to rescind the grants that exceeded the cap.”

– Broc Romanek