Activists Focus Ire on Director Elections, Pay Votes by ProQuest

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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
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