The NASPP Blog

It’s been a little while since I’ve heard much of anything about Say-on-Pay. I can’t say that I’ve been disappointed about that, either. It’s nothing against those who spend their time working on and following that topic, but with the overdrive of talk and discussion on Say-on-Pay over the last couple of years, it’s been nice to focus some thoughts elsewhere. I was nearly asleep (at least in terms of monitoring Say-on-Pay) when some interesting information on the subject crossed my desk last week.

2012 Failures Higher than 2011

According to Ed Hauder in his Say-on-Pay blog, 55 companies have reported failed SOP votes thus far in 2012. That’s higher than the 44 companies who failed to obtain a passing vote in 2011. This surprises me a bit, as I had assumed the numbers would continue to decline as more companies refined their Say-on-Pay practices. Or, maybe I thought shareholders would lessen their vigor as time moved on. It seems I was wrong about both assumptions. The list of companies is published in Ed’s blog, and they aren’t no-name companies either. Companies like Abercrombie & Fitch, KB Home, Chesapeake Energy, Citigroup and Pitney Bowes all made the list.

It does seem that Say-on-Pay is working as intended. I note that Apple had no trouble gaining approval for CEO Tim Cook’s $378 million dollar compensation package, but that gives credence to the thought that when the company is performing well, shareholders don’t mind compensating top management. That’s not to say that doing well gives a company a “get-away-with-say-on-pay” card, but it does seem to be true that companies who are under-performing are more targeted than those that are meeting or exceeding expectations. It kind of reminds me of playing blackjack in a casino. Have you ever watched someone who is winning big? As long as they’re winning, they have no trouble plinking down big bets and tipping the dealer handsomely. Watch that same person hit a bad run of cards and enter a losing streak: the tips disappear and the size of the bet shrinks.

Not Yesterday’s News

The message seems to be that it’s not time to get too secure in expecting a passing Say-on-Pay vote. Companies that have yet to enter their 2012 proxy seasons should take note that shareholders haven’t forgotten about Say-on-Pay; it is still very relevant and has not faded like yesterday’s news.

Looking forward, I think there is a lot more about Say-on-Pay that we’ve yet to hear about. Last month Britain unveiled its own proposed version of Say-on-Pay, with far more stringent items on the table, like binding votes on compensation and the ability to vote on the ratio between fixed and variable compensation.

What to Do?

While we as stock plan professionals may not be the primary drivers of initiatives that fall under the Say-on-Pay umbrella, we’re certainly involved in administering or managing aspects of compensation. As compensation strategies are discussed and brought to the table, we can and should ensure that Say-on-Pay is and remains an important part of the discussion.

-Jennifer