I just received a proxy statement from Umpqua Bank and one of the issues to be voted on is an Advisory Vote on Executive Compensation or "Say on Pay". I've always thought that was a good idea. However, in this proxy statment Umpqua is saying that this got voted down last year and they have done a number of things in response to the no vote and have put the item back up for a vote on this years proxy statement. Can anyone explain why a "say on pay" is a bad thing?
"Say on pay" implies that shareholders will be able to vote on some salaries depending on the specifics of the plan. That implies a delay and sometimes costs for special votes and mailings etc.The bottom line is executives like to be able to manage these things at will. Approval of the board of directors should be adequate. Any rules cause them headaches (and questions their judgement if their recommendation fails).But not to worry, few of these votes ever pass. Usually large shareholders vote for whatever the company recommends (I do).If you question the judgement of the board of directors, it's usually best to sell and buy something with better management. Voting on shareholder issues amounts to rearranging deck chairs on the Titanic.
Can anyone explain why a "say on pay" is a bad thing?Simple. The stockholders might not think that the officers are worth what they are being paid. And they might be right.
Paul: 'But not to worry, few of these votes ever pass.'Actually, minority shareholders' views are beginning to have an impact, as I posted here:''Thanks to a “say on pay” clause in last year’s Dodd-Frank financial-reform law, the pay of every senior executive of an American public company is now subject to a shareholder vote. So far in this spring’s corporate annual-meeting season, the management has lost such votes at four firms, the most prominent being Hewlett-Packard, a computing giant.'''Occidental Petroleum, one of three firms that were defeated in the far smaller number of “say on pay” votes held last year, is rumoured to be working on big changes in its pay policies, following criticism of the bounty enjoyed by its chief executive, Ray Irani. ''Disney, for example, issued a new proxy form (the document describing what shareholders will vote on) that cut the size of its bosses’ golden parachutes, after investors’ grumbles.'http://boards.fool.com/your-say-on-pay-is-making-a-differenc...More recently, J&J's Weldon ceded his CEO title after getting a noticeable thumbs down from shareholders.'If you question the judgement of the board of directors, it's usually best to sell and buy something with better management.'Only if the business' fundamentals aren't worth the effort of voting for change. If we believe in its long term prospects, shouldn't we at least try to effect change by exercising our votes?---------------------Global Gains Home Fool
If we believe in its long term prospects, shouldn't we at least try to effect change by exercising our votes?Sure, but proxy fights almost never succeed, and certainly not from individual small investors voting their shares.CEOs of major corporations serve at the pleasure of major shareholders. If they lose support of those shareholders, they don't last long. Those major shareholders usually can easily outvote the other shareholders. Hence, CEO can usually pass or reject whatever shareholder initiatives he likes. Small investors rarely matter.
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