Corporate Governance

More on Say on Pay

By J. Robert Brown

We noted yesterday about the role of Say on Pay in the current election cycle, the matter having become part of the Democratic Platform.  A small matter in the greater scheme of things perhaps, but nonetheless interesting that the matter has become part of the national campaign.  Moreover, as corporate behavior in response to proposals shows, there is a need for mandatory federal legislation in the area. 

In that regard, Risk Metrics has a nice post on the latest in the "say on pay" and noted that a proposal at Valero Energy passed with 53.7% of the vote.  It was the tenth say on pay proposal to pass, with the proposals averaging 42%, roughly the same as last year.  In other words, there has not, as some have suggested, been a significant decline in support for the proposals. 

The Valero vote, however, demonstrates clearly the need for federal legislation.  It is the second year in a row that the proposal has passed and so far there is no indication that the company will implement the proposal.  This is the case even though any vote would be advisory.  Thus, shareholders have to go through the logistical process of obtaining approval by shareholders.  Even then, because many such proposals are advisory (a result encouraged by the Delaware Court's decision in the CA case), board are legally free to ignore them, and they do.  With federal legislation, however, the proposals will become mandatory.

Full post as published by The Race to the Bottom on August 27, 2008 (boomark / email).