Push for pay reforms grows
High executive pay and perks have long been a hot-button issue for some investors and overseers of union pension plans.
But crashing values of many Americans' retirement savings and pay scandals at some companies that received taxpayer bailouts are feeding new interest in rules to boost shareholder input.
"I think this year is different because shareholders are just so angry about the losses" to their retirement accounts and other savings, said Amy Borrus, deputy director of the Council of Institutional Investors, which represents pension funds and other big investors.
The financial crisis has spurred a push for more shareholder control over executive pay and other decisions, Borrus said. "If it's going to improve in the near future, I think it's going to come this year," she said.
Last week, the Obama administration appointed a "pay czar" to oversee executive pay issues at companies that received large amounts of federal bailout money, but stepped back from earlier talk of capping salaries. Instead, White House officials plan to push legislation and other measures that would boost shareholders' control over management compensation.
The Securities and Exchange Commission recently proposed regulations that would make it easier for shareholders to nominate board candidates without going through a costly proxy fight. The SEC last week said it also will push for more disclosure of potential conflicts of interest related to executive pay, such as board members' qualifications and compensation consultants' ties to client companies.
The financial crisis has raised questions about "whether boards need to be held more responsible for their decisions regarding such issues as compensation structures and risk management," the SEC said.
The proposed changes would allow large shareholders —- those owning 1 percent to 5 percent of the company's stock, depending on its size —- to put forward alternate board candidates.
Another SEC rule change would allow shareholders to propose changes in how directors are elected. U.S. Sen. Charles Schumer (D-N.Y.) also has introduced a bill to create a "shareholder bill of rights" requiring similar shareholder access to board nominations as well as annual votes on executives' pay.
Already this year, shareholders at hundreds of companies have been voting on so-called "say on pay" proposals. Under these proposals, shareholders get a chance to ratify or reject executive pay packages in a nonbinding ballot. Other initiatives ask for such a vote at future meetings.
Most were added to agendas at banks and other financial institutions, including Atlanta-based SunTrust Banks, as a condition for receiving federal bailout money.
Shareholders also proposed similar votes at about 100 companies that didn't receive bailout money, according to RiskMetrics Group. The proxy advisory firm said the "say on pay" proposals recently won a majority at nine firms, including Pfizer, Honeywell International and Marathon Oil. Two companies, Apple and oil refiner Valero Energy, agreed to annual pay advisory votes.
