A majority of directors who attended the National Association of Corporate Directors earlier in Washington this week agreed CEO pay is too high. A number of board members also believed that Congress would mandate non-binding advisory votes on executive compensation and proxy access, next year.
Nearly 75 percent of approximately 350 board members polled during the NACD conference expected increased shareholder communications to be mandated. Both Senator Barack Obama and John McCain have voiced some level of support for say on pay legislation and if Obama is elected, some expect a comprehensive shareholder bill of rights in the first 100 days of an Obama administration.
“Investors are angry. And when they’re angry, they sue somebody,” said Michael Smith, president of AIG Executive Liability. He also noted that institutional investor lawsuits will take longer to resolve and are not often settled out of court.
Where do we go from here? How do we adjust our approach, because the government is in fact, as of last week, a significant shareholder in nine very large corporations,” said Charles Elson, chair of the corporate governance program at the University of Delaware, who also serves on the HealthSouth and AutoZone boards, told FinancialWeek.
Despite the agreement among most board members to open up communication lines between boards and shareholders, many still think there should be limitations. One month limits geared to shareholders with primarily larger shareholder with big blocks of shares. “Wealth has its privileges,” said Peggy Foran, general counsel at Sara Lee Corporation, to FW.
The NACD principles stated that boards should reach out to “large, long-term shareholders” about governance issues and long-term strategy, and that these communications should involve at least one independent director, preferably the lead director, in addition to the CEO.