Say on Pay 2010

A day in the life of Doug Chia

Johnson & Johnson’s Douglas Chia, chair of the corporate secretaries focus section here on Say on Pay 2009, represented the Society of Corporate Secretaries and Governance Professionals at a special session on proxy reform held last night at Baruch College for the National Investor Relations Institute’s New York chapter.

• Drove to work listening to a podcast by a compensation consultant on say on pay and heightened compensation disclosure.
• Arrived at the office and reviewed J&J’s draft 10-Q, which is to be filed next week.
• Talked to J&J’s IRO about a potential disclosure issue around the 10-Q.
• Over lunch, listened to a webinar by another compensation consultant.
• Began the afternoon putting finishing touches on a comment letter on proxy access to be sent to the SEC by a group of companies.
• Back in his car, talked on the phone to an internal group about a request from a UK-based socially responsible investor for additional disclosure.
• Still on the road, phoned Washington contacts about Barney Frank’s say-on-pay bill, now in markup and headed for a vote Thursday or Friday.
• At NIRI-NY’s panel session, told how corporate secretaries won’t be goofing off over the next several months. He expects many more similar days packed with say on pay, compensation disclosure and other proxy season priorities. ‘Double my pay, please!’
• On his way home, was planning to think about how to reach out to retail shareholders –  without the broker vote, there will be a 25 percent to 30 percent block of shareholders voting on their own next year.

Neil Stewart, executive editor, IR magazine

Inviting Comments on Activist Concerns about Universal “Say on Pay”

Ed Durkin, the representative of the United Brotherhood of Carpenters (“UBC”) whose proposals of alternatives to universal “Say on Pay” have been stimulating debate among corporate governance professionals,  has encouraged comments from Forum participants on the observations he presented in the following letter to the SEC:

• July 20, 2009, Edward J. Durkin of the United Brotherhood of Carpenters, letter to the U.S. Securities and Exchange Commission regarding its July 1, 2009 proposed rules [Release Number 34–60218, File No. S7-12-09]: “Shareholder Approval of Executive Compensation of TARP Recipients” (4 pages, 63 KB, in PDF format)

As an experienced activist in the advocacy of pension fund interests in executive compensation and other corporate governance issues, Mr. Durkin supported his very practical concerns with the following explanation (pages 3-4 of his letter):

Foundations for Implementation of “Say on Pay” Processes

Tim Smith, who chairs the focus section for “Say on Pay Advocates,” has submitted the following comment letter to the SEC regarding its proposed regulations for TARP recipient implementation of “Say on Pay:”

• July 14, 2009, Timothy Smith of Walden Asset Management, comment letter to the U.S. Securities and Exchange Commission regarding its July 1, 2009 proposed rules [Release Number 34–60218, File No. S7-12-09]: “Shareholder Approval of Executive Compensation of TARP Recipients” (8 pages, 48 KB, in PDF format)

You will see that Mr. Smith focuses on the relevance of the proposed TARP recipient rules as a precedent for expected broader applications of advisory voting, emphasizing the importance of defining the process as a foundation for more effective shareholder communications. This communication objective is clearly shared by a wide range of Forum participants with otherwise differing views about advisory voting, and is expected to be the uniting purpose of a Forum project addressing the proposed rules.

Anyone interested in the development of a practical foundation for communications is encouraged to help us develop Forum plans for this project.

Opportunity to Define New Rules for Shareholder Communication

Last week’s expected action by the SEC to propose rules for TARP recipient implementation of “Say on Pay” was accompanied by support for the types of investor communications and information that Shareholder Forum participants have consistently advocated as a foundation for sound, long-term corporate performance.

(See July 1, 2009, U.S. Securities and Exchange Commission press release: “SEC Proposes Measures to Improve Corporate Governance and Enhance Investor Confidence.”)

All of us should appreciate this recognition of informed professional views in the formulation of historically important public policies, and be encouraged by the continuing opportunity to help define effective marketplace practices on which a healthy economy can be built.