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Eleven and Counting

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May 03, 2011 | Barbara Baksa

Eleven and Counting

Say-on-Pay vote failures have picked up, with more failures last week than any other week so far this proxy season. Today I provide an update on the latest Say-on-Pay stats and comment on a couple of companies that recently modified options granted to their CEOs in response to shareholder feedback related to their Say-on-Pay votes.

Say-on-Pay: The Latest Data
Broc Romanek and Mark Borges have been keeping track of Say-on-Pay votes in their respective blogs on and Last week, Navigant Consulting, Cogent Communications, MDC Holdings, and Janus Capital were the eighth, ninth, tenth, and eleventh companies to report that their Say-on-Pay proposals failed.

Say-on-Pay Frequency

Say-on-Pay Frequency votes seem to be primarily ending up in the annual camp; if my math is correct, of the companies that have held and reported votes thus far, 72% have reported that shareholders prefer annual votes. Many companies have put forth a recommendation for an annual vote, rather than risk the embarrassment of shareholders voting against managements' recommendation.

Even so, a triennial vote is a possible outcome--Mark Borges reports that, of the 235 companies where the board has recommended a triennial vote (and the companies have reported vote results), only 43% have reported that shareholders indicated a preference for annual votes. Fascinatingly, at one company (Qualstar), management recommended an annual vote but shareholders preferred a triennial vote.

Options Modified in Response to Shareholder Feedback

I think it is also notable that, in the last two weeks, two companies, GE and Lockheed Martin, announced modifications to options held by their CEOs. The modifications added performance targets to options that were previously only service-based. In both cases, the modified options now vest based on two independent performance goals (50% of the options vest when one goal is met and 50% vest when the other goal is met). In Lockheed's case, one goal is based on cash from operations and the other is based on ROIC. For GE, one goal is also based on cash-flow, but the other goal is tied to relative TSR--which adds a market condition to an option that was previously only service-based. I'm very intrigued by the accounting implications--or possible lack thereof--of these modifications and I hope to look at them at length in an upcoming issue of The Corporate Executive.

According to SEC filings submitted by both companies, the options were modified in response to conversations they had with shareholders (and ISS, we imagine). It seems likely that the modifications were necessary to ensure passage of their Say-on-Pay votes and are illustrative of the level of power Say-on-Pay has given shareholders.

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NASPP members that complete the NASPP's 2011 Domestic Stock Plan Administration Survey (co-sponsored by Deloitte) by May 13 can save 10% off the early-bird rate for the 19th Annual NASPP Conference (which is already a significant savings off the regular registration rate). Register to complete the survey today--so you don't have to explain to your boss why you missed out on this rate.

Only Ten Days Left for NASPP Conference Early-Bird Rate
It's hard to believe how time flies, but the 19th Annual NASPP Conference early-bird rate expires next Friday, May 13.  This deadline will not be extended--register for the Conference today, so you don't miss out.

NASPP "To Do" List
We have so much going on here at the NASPP that it can be hard to keep track of it all, so I keep an ongoing "to do" list for you here in my blog. 

- Barbara 

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