The latest results on “say on pay” voting are in. As readers of this blog probably know, the Dodd-Frank Act added a new section 14A requiring “say on pay,” shareholder votes on the compensation of senior executives. In February, the SEC adopted a new Rule 14a-21 providing for such votes.
The Wall Street Journal reports that shareholders at 39 of 2532 companies conducting such votes voted against executive pay plans. At 71% of the companies, the executive pay plans received at least 90% support.
The policy implication of these numbers is unclear. Is the 98.5% approval rate a strong argument against requiring companies to go through this exercise? Or should we focus on the small number of companies where shareholders voted against management? Even at the latter companies, the vote won’t necessarily have any effect. Under the SEC rules, these votes are purely advisory. A company has no obligation to eliminate a pay plan rejected by the shareholders.
In response to his question, "Is the 98.5% approval rate a strong argument against requiring companies to go through this exercise?," my answer would be a resounding YES.
