Earlier this week Aflac became the first large US company to offer shareholders the opportunity to approve compensation for top executives. Faced with an up or down vote, the shareholders resoundingly approved the $12 million pay package by a vote of 93 percent.
Institutional investors and shareholder services have pushed proposals to give shareholders the opportunity to approve pay packages for the past three years. Some companies have asked shareholders to reject such measures. Last year, 43 percent of proposals received shareholder support. This year, the approval rate is at about 42% according to Risk Metrics.
A shareholder vote against a specific compensation package is troublesome because there is no way to know what it means. Different shareholders vote no and yes for different reasons so it is difficult to know which aspect of the compensation is being rejected, or more importantly, what type of compensation package a majority of shareholders would support.