As compensation continues to be scrutinized by the public and the government, some of the country’s largest firms are taking steps to ease shareholders’ concerns long before proxy battles are launched. Pfizer is the latest company to approve giving shareholders an advisory vote on executive compensation. The first vote will take place at Pfizer’s annual meeting in 2010 and will occur on a biennial basis after that.
“It’s a great step for Pfizer; more and more companies are being proactive [about communicating with shareholders],” says Darren Check, partner at Barroway Topaz, a shareholder class- action firm. Pfizer has held informal sit-downs with shareholders for the past few years. “It has to do with the attitude at the top of the company,” notes Check. “What’s key is having the right CEO who has an attitude that shareholders are the owners of these companies and they should have a platform to be heard.”
Pfizer isn’t alone. Aflac, Occidental, Bristol-Meyers Squibb, and Microsoft have all taken similar steps to lend shareholders a voice regarding executive compensation. “I believe that soon, smaller companies will begin to make similar changes,” predicts Robert E. McGarrah Jr., counsel of the AFL-CIO Office of Investment.
The House Financial Services Committee recently approved the Private Fund Investment Advisers Registration Act of 2009, a bill that would require investment advisers of hedge funds, private-equity funds, and other private pools of capital to register with the Securities and Exchange Commission. The bill is part of larger financial regulatory reform legislation, which seeks to curb excessive executive pay practices.
McGarrah reflected on a recent meeting involving a Fortune 100 company that is taking a ‘wait and see’ approach. “A com-pany can take its chances that Congress isn’t going to mandate anything, or it can step up to the plate and recognize that this [shareholder advisory voting] makes sense and is a mainstream issue,” says McGarrah. “We are strongly in favor of Pfizer’s decision—but we’d like to see them [and other companies] take it further and introduce an annual vote.”