Federal Securities Law Source

Archives: Shareholder News

Subscribe to Shareholder News RSS Feed

More Say on Pay Support

According to Institutional Shareholder Services, Valero Energy has become the fifth company this year to have investors support an annual advisory vote on executive compensation. Investors at Ingersoll-Rand, Motorola, Blockbuster, and Verizon Communications have also approved, by a majority or more, so-called “say on pay” advisory votes.

ISS reports that in 2006, seven similar resolutions went to a vote and averaged 40% support. Two bills are currently in Congress (one in the Senate and one in the House) that would require every publicly traded company to allow for an annual advisory vote on executive compensation. The House Bill passed in April. See previous posts about Say on Pay issues here, here, and here.…

Ohio Permits Majority Voting for Directors

Ohio Governor Ted Strickland signed a bill into law yesterday that allows Ohio corporations to permit directors to be elected by means other than a plurality of votes. Previously, Ohio law stated that director candidates who receive the greatest number of votes are elected. The law has been amended to allow shareholders to provide for different methods of election in the articles of incorporation, such as election by a majority vote.

The Ohio State Bar Association supported the amendment because some Ohio corporations have received shareholder proposals to reincorporate in states where a majority voting provision could be adopted, namely Delaware. The OSBA expects the new law to keep businesses in Ohio. …

New Study Raises Mutual Fund Questions

Lauren Cohen of Yale University, Andrea Frazzini of the University of Chicago, and Christopher Malloy of the London Business School have made available a study indicating a correlation between mutual fund returns and the relationship between the fund manager and the executives of the companies in which the fund managers invest. The study indicates that funds do better when fund managers invest in companies operated by old college and graduate school classmates.

Professor Dale Oesterle of Ohio State University’s Moritz College of Law blogs here that this study could indicate these mutual fund results are due to insider trading. Another explanation is that fund managers simply have better information regarding whether old acquaintances know how to run a business. If insider trading is the reason, this study could lead to scandal just as similar studies regarding correlations in stock trading led to the option backdating scandal.       …

Aflac Shareholders Will Have a Say on Pay

Staying in line with Aflac CEO Dan Amos’ belief that executives should be respected and not feared by a company’s shareholders and employees, Aflac is the first U.S. company to permit shareholders to have a say on pay. Thus, beginning in 2009, Aflac shareholders will have an advisory vote on executives’ compensation. ABC News Nightline ran a brief story about Aflac on Monday.…

Senate Supports Shareholders’ Say on Pay

The same day the House of Representatives approved the Shareholder Vote on Executive Compensation Act, a similar bill was introduced by Senator Barack Obama in the U.S. Senate. The bill has been referred to the Committee on Banking, Housing, and Urban Affairs. We will continue to update you on any developments.…

Shareholders’ Say on Pay

On April 20, members of the U.S. House of Representatives approved a bill that would provide shareholders of public companies with an advisory vote on executive compensation. H.R. 1257, the “Shareholder Vote on Executive Compensation Act,” was passed by a vote of 269-134.

H.R. 1257 would also provide shareholders with a separate advisory vote on golden parachute compensation. Thus, for example, shareholders would have an advisory vote on the offering of a severance package to a principal executive officer of a company in connection with the sale of the company’s assets.

The Administration opposes the bill, noting in a statement that it “does not believe that Congress should mandate the process by which executive compensation is approved.” The Administration further noted that recent improvements in corporate governance and executive compensation rules need “time to take effect” before additional governance rules are mandated.

Shareholders have an existing mechanism through shareholder proposals to offer advice to its board of directors. The Washington Post recently reported that shareholder proposals relating to compensation include proposals urging directors to strengthen links between pay and performance, proposals urging votes against directors who are on compensation committees, and proposals urging directors to develop compensation practices similar to those of comparable companies.

So far, however, shareholders who have supported say on pay proposals have fallen short of success. Last year was the first year that such a proposal appeared on shareholder ballots. The seven say on pay proposals earned an average of 40% of shareholder votes.

Thus far this proxy season, say …