THE ANNUAL FORTUNATE 50

With the economy improving, executives see pay increases, bonuses and equity awards again
May 22, 2011 12:00 am

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"It's a meaningless number that's expected to inflame passion rather than something that investors need," he said.

There is evidence that so-called say-on-pay votes will influence how and how much executives are paid. The nonbinding shareholder referendums on a company's pay practices were used on a limited basis prior to the collapse of financial markets in 2008. They were then applied to financial institutions and became law with the passage of Dodd-Frank last summer.

Compensation experts said it was too early to tell just how much influence the shareholder votes will have, but expect that there will be an impact.

"People will pay attention to negative votes," Mr. Sirkin said.

One big unknown is how mutual funds and other large institutional investors will cast their votes. Last week, the American Federation of State, County and Municipal Employees said mutual funds too often vote for management pay plans and against shareholder pay proposals. They also frequently do not use their influence by voting against directors responsible for a company's pay plan, the union group said.

AFSCME labeled Vanguard, BlackRock, ING and Lord Abbett as the biggest "pay enablers" in the mutual fund industry.

Mr. Elson said say-on-pay did not address the real flaw in pay plans, which is that companies inappropriately base compensation on flawed comparisons to peer companies. That's why executive pay keeps rising, he said.

When it comes to shareholder referendums on pay, "no one wants to get a negative vote," Mr. Elson said.

"That doesn't mean compensation rates are going to go down. It just means there's more concern," he said.

Len Boselovic: lboselovic@post-gazette.com or 412-263-1941.
First Published 2012-02-13 03:00:57
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