by James R. Copland for Boardmember, May 2011.
With the 2011 proxy season now in full swing, several trends are already emerging that deserve notice among those watching corporate governance. Key issues that have emerged thus far and deserve our attention as the proxy season unfolds include votes on executive compensation, proposals designed to enhance shareholder power outside the annual meeting process, and increasing scrutiny being applied to corporations’ political spending.
Under Section 951 of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, each public company holding its annual meeting after January 21, 2011, must submit two votes to shareholders: one asking shareholders whether they would like to review executive pay annually, biennially, or triennially; and another asking shareholders to approve the current year’s executive-compensation package. In general, shareholders to date have approved of executive-pay packages but asked for annual advisory votes.
Among the 25 Fortune 100 companies holding annual meetings between January 21 and April 28, only the shareholders of Hewlett-Packard (HP) voted against the company’s executive-pay package. Vote results at the biggest companies highlight the influence of proxy-advisory firms and organized labor: the proxy-advisory firm Institutional Shareholder Services advised its clients to vote down the HP pay plan; and two drug companies whose pay plans were targeted by the American Federation of State, County, and Municipal Employees—Pfizer and Johnson & Johnson—only garnered 57 and 61 percent support for their executive compensation proposals, as compared to over 90 percent support at most companies. (continue reading… )