Say on Pay Voting Periods – Size Does Matter


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Expert Perspective from Grahall’s OmniMedia Editorial Board

In a nearly unprecedented turn of events, 39 institutional investors issued a press release (Investors Issue Call for Annual Vote on Executive Pay)  calling for “public companies to support annual advisory votes on executive compensation in their 2011 proxy statements and for investors to vote for annual ‘Say on Pay’ votes.” 

According to Grahall’s Garry Rogers who has reviewed over 200 such early filings, a majority of public companies are recommending three-year votes. So the lines are clearly drawn in the sand.  Rogers says: “Although it’s still early, at this point the three year time period is clearly the most popular.”  However, the size of the filer also appears to be a factor on the frequency recommendation. Rodgers adds: “Seven of the ten largest companies have recommended annual reviews, and the overall rate of annual reviews is noticeably higher for companies over $1 billion in market capitalization when compared to smaller companies”.      

According to the press release, 39 institutional investors, major mutual funds and influential proxy advisor Institutional Shareholder Services (formerly RiskMetrics) have thrown their weight behind annual votes. 

Clearly a one-year period creates a much stronger “watchdog” atmosphere, and some companies may benefit from this level of oversight.  Our concern is that like any other corporate structure, program or protocol, “one size may not fit all.”  Two-year or even three-year voting periods might make sense for some public companies particularly if their compensation structures are based on longer performance periods.   In addition, some observers have argued that the one-year period may become just another compensation formality, while a three-year review would be more novel and taken more seriously, while promoting a more significant emphasis on long term growth.

In either event, the Say on Pay process has its weaknesses regardless of what duration period a company employs.  Already, one high profile filer Monsanto, received a 65% vote in favor.  Is that sufficiently high for the company to accept, or should it revise its compensation programs?  Clearly, 35% is a significant number of shareholders unhappy with the current program.  This starkly illustrates the potential quagmire that can result from an “up or down” Say on Pay” vote , which obviously doesn’t lend itself to specific interpretation, and it’s not clear what to do in such circumstances, other than to engage your shareholders.

What is clear is that as investors, mutual funds and ISS continue to press for annual reviews, we may just see the annual period become the norm, particularly at larger companies.   Whether this will result in maximum accountability, and encourage companies to communicate effectively with shareowners (who themselves may be voting against a program for individual reasons) remains to be seen. 

Contact Grahall’s OmniMedia Editorial Board at

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