Spring Meeting: Corporate Governance Round Table – Part One: Say-on-Pay

by Charles Nichols for The Race to the Bottom, April 20th, 2011.

The following three posts will summarize Friday’s Corporate Governance Roundtable. Before beginning the series, Todd and I would like to personally thank everyone from the ABA Business Law Section and the University of Denver Sturm College of Law, especially the SBA, Professor Jay Brown, and Armin Sarabi, who made this trip possible.

The topic of Say-on-Pay led the discussion as it is being voted on by nearly every major corporation this year.  The panel began by discussing the positives brought on by Say-on-Pay. The first of which is requiring clear and well-described pay packages to receive a positive vote.  A member of the panel also voiced the position that Say-on-Pay allows for a much better outlet for pay concerns than what previously existed.  However, all did not share these views.  One overwhelming concern was that a compensation discussion between shareholders and the board should be a dialogue, not a mandated vote.  One panelist clearly articulated that because Say-on-Pay is statutory it is resented.  In the past, corporations have been willing to adopt different “best practices,” albeit on their own schedule, such as majority voting, but not because they were mandated.  He believes Say-on-Pay was not given the same opportunity.

The conversation on Say-on-Pay continued with the question of whether it is really even a big deal? Is this authority really any different from the power of a withhold vote? This led to reference to pending Australian legislation where, if more than a 25% withhold vote exists on Say on Pay for two consecutive years, it triggers a Spill Vote (to remove the entire Board) within 90 days. I am sure our readers can imagine the varying reactions this mention received.  (continue reading… )


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