The Securities and Exchange Commission put hundreds of companies on notice that they must submit their executive pay plans to an advisory shareholder vote of confidence within months, reports Global Proxy Watch.
The SEC issued an updated guidance yesterday that backed the legislative interpretation offered by Senator Christopher Dodd in a February 20 letter to the agency. As chairman of the Banking Committee, Dodd has oversight authority over the SEC and inserted the advisory vote provision into the recently enacted economic stimulus legislation, according to the RiskMetrics Blog.
The new SEC guidance and Dodd’s letter has further encouraged the investor coalition that filed more than 100 “say on pay” resolutions this season. This campaign has made significant progress since 2006 when the first shareholder proposals appeared on U.S. ballots. Insurer Aflac held the management-sponsored advisory vote last May, and was followed by five other firms in 2008.
Tim Smith, a senior vice president at Walden Asset Management and a leading pay vote proponent, said the latest SEC guidance will prod other firms to agree to hold pay votes. He recalled that one major bank had expressed concern that holding a pay vote would leave it at a “competitive disadvantage,” but said the new guidance “leaves us feeling much more comfortable with providing investors a chance to vote on compensation.”