Say on Pay 2010

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.

Say On Pay Part of Reform Proposal

As indicated this Pensions & Investments article and in Secretary Geithner’s statement compensation (included below), there has been a major breakthrough on the Advisory Vote, or say on pay. The Administration is supporting legislation on say on pay which would give the SEC the authority to require all companies to institute the Advisory Vote.

Clearly this is an important step forward in making this a reality, building on the hard work on many investors and a number of companies that have supported this reform the years.

The announcement comes at the end of a very active proxy season on executive compensation with close to 100 companies receiving Advisory Vote resolutions and votes averaging 47% with 18 companies receiving votes over 50% .

A number of pay consultants and conservative groups have begun criticism charging the government with ‘meddling’ in the compensation process. Ironically, say on pay does not provide for a role for government ( unless they are huge owners) but instead gives owners the platform for feedback.

Letter to Strayer Education CEO Robert Silberman

In light of Gretchen Morgenson’s article in the New York Times featuring Strayer Education's CEO, Robert Silberman, here's a letter I sent to him congratulating him on his outreach to investors on pay issues.
– Tim Smith

May 19, 2009

Mr. Robert S. Silberman
Chief Executive Officer
Strayer Education Inc.

Dear Mr. Silberman:

     Walden Asset Management is a division of Boston Trust & Investment Management Company and together we own approximately 37,000 shares of Strayer Education.  It has been one of the top ten holdings in our small cap portfolio and we have been a long-term owner of Strayer shares.

     Our clients at Walden are concerned about environmental, social and governance issues (ESG) as well as a company’s business plan and financial performance. We consider Strayer to be a leader in ESG performance as well as a leader in your industry.

     We were very pleased to see you profiled in the Gretchen Morgenson story on “Say on Pay” in the Sunday New York Times.  Walden has been an active proponent of Say on Pay and has been in dialogue with scores of companies and a sponsor of shareholder resolutions with close to 20 companies.

Seattle Times editorial: 'Bring it on'

A very positive editorial in the Seattle Times on the Advisory Vote:

Stockholders should demand a say on executive pay
Shareholders at Dow Chemical pass a "say on pay" measure – a proposal for monitoring executive pay. Other companies should do the same.

Prudential Shareholders Pass Say-On-Pay Proposal

FOR IMMEDIATE RELEASE - 5/13/09

Prudential Investors Approve Responsible Wealth Say on Pay Resolution

Boston, MA – At the 2009 annual general shareholder meeting of Prudential Financial on May 12, in Newark, NJ, company stockholders voiced their approval of a proposed “Say on Pay” vote on executive compensation. The proposal received a 61.5% majority vote, according to preliminary results.

William Creighton of Freeport, Maine submitted the proposal as a Prudential shareholder and member of Responsible Wealth, a project of United for a Fair Economy in Boston.  Responsible Wealth is a national network of 700 members who use their voices as upper-income taxpayers and shareholders to advocate for progressive tax policies and corporate accountability.

“This strong majority vote reflects the feeling of shareholders around the country that they want a voice on executive compensation,” says Mike Lapham, Project Director of Responsible Wealth. “While Prudential’s executives continue to receive lavish compensation packages, shareholders have seen the company’s stock plummet in recent months.  They want to have a say in the matter.”

New 'Compensation Principles' from Goldman Sachs

On May 8, I had the opportunity to attend and speak at the Goldman Sachs stockholder meeting. Last year Walden Asset Management and other investors had filed a resolution seeking an Advisory Vote. It received a 46% vote. We refiled this year along with the Connecticut’s state pension fund and other shareowners, but withdrew the resolution when GS agreed to implement an Advisory Vote as required as a TARP recipient. 

Thus GS presented a resolution urging approval of their compensation package. It passed overwhelmingly with a 98% vote. During the discussion of the comp package, Lloyd Blankfein, the CEO, made a major statement presenting a new set of Goldman Sachs’ Compensation Principles. He noted these had roots in past thinking and practice but were newly created. He also noted the intense interest in executive pay and felt these principles would help respond to these public concerns.

It is my belief that having a vote on pay provided a platform for GS to address the issue at length – another way in which SOP has advanced significant dialogue with shareowners on pay.

Tim Smith, senior vice president and director of socially responsive investment, Walden Asset Management

Carpenters Proposal Submitted to P&G

Readers will be interested to see a new resolution filed by the Carpenters with P&G dealing with both an Advisory Vote and expanded communication process via a forum for investors on executive compensation. While proponents of SOP will continue to press for annual votes, they have also been supporting improved communications with investors.

Click here to read the proposal (PDF, 84Kb)

Tim Smith, senior vice president and director of socially responsive investment, Walden Asset Management

AFSCME Press Release: Say On Pay Shareholder Proposals Garner Record Support

Here is a press release prepared by AFSCME that went out today summarizing the growing support for the Advisory Vote and our belief that this will help Congress sense the interest of investors in this reform.
– Tim Smith

Monday, May 04, 2009

Say on Pay Shareholder Proposals Garner Record Support During Tumultuous Shareholder Season

Say on Pay shareholder proposals have gained new momentum in the wake of recent financial scandals, excessive compensation and shareholder anger at high profile corporations such as AIG, Bank of America and Citigroup.

Washington, D.C. – Say on Pay shareholder proposals have gained new momentum in the wake of recent financial scandals, excessive compensation and shareholder anger at high profile corporations such as AIG, Bank of America and Citigroup.

We are moving from advocacy for an advisory vote on exec comp to smart implementation

A wide range of investors have been pressing for an advisory vote for three years now. These investors range from huge institutions like TIAA-CREF and CalPERS to religious investors to trade union pension funds to individual shareowners. Suddenly the debate is in a new zone as TARP companies join the two dozen companies that have voluntarily put say on pay into effect. The result is that approximately 400 companies will be having such votes in 2009, giving us real-world experience on how this is being implemented, how it helped board comp committees as well as limits on its usefulness. We will get to see up front and personal how the proxy advisory firms recommend votes on management sponsored resolutions as well how institutional investors and mutual funds  cast their ballots.

We will also see creative communications models set up by companies to gather nuanced investor reactions to comp philosophy and practices.One such new approach is Amgen's utilization of 10 questions created last year by TIAA-CREF, asking investors to use them as a guide for feedback.

This an extremely important complement to the actual vote which companies and investors alike agree is difficult to interpret without a tool for actual comment.

I hope this website and the ongoing opportunity for discussion about how best to implement the advisory vote will help investors and issuers alike.

– Tim Smith, senior vice president and director of socially responsive investment,
Walden Asset Management; founding leader of the ‘Working Group’ organized in 2007 to advocate ‘say on pay.’

How to get a say on pay proposal removed from a proxy

As TARP recipients prepare say on pay proposals, they're taking steps to get previously submitted  shareholder proposals withdrawn. The following email from a prominent financial institution to several institutional investors is a good indication of how to make the request. The draft preliminary proxy referred to is included in the next post.

This example was provided by Timothy Smith, senior vice president of the environmental, social and governance group at Walden Asset Management. As this is a non-public communication between the company and the proponent, most names have been removed.