He cited many instances of activist shareholders trying to push for change. For example:
Qwest (NYSE: Q), a high school teacher earning $55,000 asked CEO Dick Notebaert (whose earnings were estimated above $30 million): "How is the service that you render so much more valuable than the service I render?" His reply echoed many defenses that other CEOs have made when they explain that it's a "competitive" market and suggest that their performance merits such steep payouts. Meanwhile, shareholders voted against four resolutions that would have limited CEO pay. J.C. Penney (NYSE: JCP) was also targeted, because last year it forked over more than $10 million to a departing executive who had only worked for the company for six months. In response, shareholders passed a resolution to have management get shareholder approval before giving severance packages worth more than about three years' salary. That's great, right? Well, not exactly. You see, shareholder resolutions are typically not binding — they simply serve as recommendations for management. Then there's Yahoo! (Nasdaq: YHOO), whose stock has been in the doldrums for quite a while. Since CEO Terry Semel took over in 2001, he had reportedly been compensated with more than $500 million, including $71.7 million last year. At the company's annual meeting this past spring, despite several major shareholder advisory companies recommending not reelecting three board members from the company's executive pay committee, they were re-elected, by a 2-to-1 margin. Failing similarly was a resolution to tie executive pay to a more competitive performance standard. Semel won this battle, but he resigned the next week. At ExxonMobil (NYSE: XOM), a shareholder proposal that the company prepare a study that compares the "total compensation package of our CEO and our company's lowest paid U.S. workers in September 1995 and September 2005" got the support of just 12% of shareholders. But the meeting had been structured differently than the year before, with most shareholders not getting a chance to speak up in support of resolutions they favored.
It's not all bad
If all this depresses you, buck up.
"Say for pay" resolutions, which demand some shareholder say on executive pay packages, are gaining traction. According to Pizzigati, they're now the law in Australia, Sweden, and the UK. In the Netherlands and Norway, shareholders can vote on executive pay in a way that binds the board. And while only half a dozen "say on pay" resolutions made it to annual meetings in 2006, 2007 has brought a tenfold increase in such meetings, with many getting shareholder support of 40% or more. Impressively, four such resolutions actually got a majority of the votes — at Blockbuster (NYSE: BBI), Ingersoll-Rand (NYSE: IR), Motorola, and Verizon (NYSE: VZ).
And here's one more uplifting factor: When you see voting results in the 30%-50% range, it means that big institutional investors are voting, not just small shareholders. This suggests that mutual funds and pension funds and the like are waking up and supporting more shareholder proposals.
Why this matters
Keep an eye on shareholder resolutions for companies you own, and cast your vote for those you believe in. Did you realize that if you don't send in your vote, management will usually count your vote as being aligned with theirs?
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