VIEWS: 4 PAGES: 3 CATEGORY: Business & Economics POSTED ON: 7/14/2010
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2010 PREVIEW Activists Focus Ire on Director Elections, Pay Votes By Melissa Klein Aguilar ballots cast are also targets of shareholder Average support for say-on-pay grew to wrath. 46 percent in 2009, up 4 percent over 2008, A perfect storm of investor anger, regu- latory reform, and economic melt- down is hurtling towards the 2010 proxy According to RiskMetrics’ 2009 post- season report, 91 directors at 49 companies failed to receive majority support. None re- according to RiskMetrics. The resolutions received majority support at 22 firms. “Given the virtual inevitability of leg- season—and directors should brace for signed (all of the companies had a plurality islative action, that could jump to over 50 their own elections to be at the center of the voting standard for director elections), and percent next year,” McGurn says. He be- hurricane. few were at large-cap companies. lieves some companies that got majority All the chestnuts of shareholder activ- “The lion’s share of our negative recom- support on shareholder resolution may put a ism from previous years—executive com- mendations are at mid-cap and small-cap management proposal on the ballot to avoid pensation, shareholder votes on pay plans, companies where the penetration of ma- negative votes against their board mem- majority election for directors, calls for jority voting … has been lower,” McGurn bers. And several dozen companies have independent board chairmen—will once says. “The question is whether activists will proposed offering the votes voluntarily, al- again top activists’ agenda for the coming complete the process of pushing majority though only a handful have let shareholders year. What’s different this year, however, is voting down to those companies.” cast ballots so far. how shareholders will make their concerns The United Brotherhood of Carpenters, Durkin says UBC may refile its trien- known. long a proponent of more shareholder- nial say-on-pay proposal, although no final “We’ve finally seen the transition from a friendly policies, plans to submit roughly decision had been made at press-time. That referendum or shareholder proposal-based 80 proposals for majority-vote thresholds idea would require a vote on compensation form of activism, to a director election-fo- in director elections, targeting the remain- plans every three years, plus another vote cused form of activism,” says Pat McGurn, ing S&P 500 companies that haven’t adopt- on yearly and long-term incentive plans and special counsel at RiskMetrics Group. ed such standards yet, according to union post-employment pay which shareholders “Even though there will be a significant spokesman Ed Durkin. would decide annually. UBC filed 20 such number of shareholder proposals filed, the Amalgamated Bank’s LongView Funds proposals in 2009, but withdrew most of big game in town now is the election of di- will also continue to press for majority vot- them to focus on lobbying efforts. rectors.” ing at companies that haven’t adopted it, ac- UBC is also drafting a set of executive Indeed, McGurn expects more bargain- cording to outside counsel Con Hitchcock. compensation principles it will convey to ing and spats over director elections in “We’re looking hard at mid-cap and small- 75 to 100 companies. The union will request 2010 than all other shareholder resolutions cap companies in the portfolio,” he says. time with each to discuss if and how it in- lumped together. The problem will be felt Hitchcock says Amalgamated expects to corporates those principles, Durkin says. most sharply at small and mid-sized com- submit proposals to provide for shareholder panies, who for the first time will weather votes on “golden coffin” death benefit agree- Performance Matters an annual meeting season without “broker votes” in director elections. Those votes, cast by broker-dealers when their clients ments, a crusade it launched in 2008. Pay Plans T he AFL-CIO also plans to un
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