The law firm Katten Muchin Rosenman LLP released an Advisory, A New Wave of Say-on-Pay and Executive Compensation Proxy Litigation, on October 29, 2012 that warns of changing tactics of the plaintiffs’ shareholder bar.
Since the say-on-pay lawsuits have been largely unsuccessful, thanks to the specific language in the Dodd-Frank Act, the plaintiffs’ shareholder bars’ new tactic is “filing class action lawsuits against companies before the shareholder meeting to enjoin the say-on-pay vote based on alleged incomplete and misleading proxy disclosures. They also challenge disclosures in connection with any required vote in amending executive equity compensation plans, such as increasing the number of shares available for issuance.”
This is a very troubling development and one that could have repercussions to almost any management proposal placed on a proxy statement for a shareholder vote. I’ve learned that a few companies have already seen similar lawsuits concerning their equity plan proposals.
On October 9, 2012, Bloomberg BNA’s Pension & Benefits Daily published this article by Exequity’s Ed Hauder. The article looks at companies whose say-on-pay (SOP) votes failed in 2011 and have reported their SOP votes for 2012, some of the actions these and other companies with failed SOP votes can take to turn things around, as well as the success this group of companies had with their 2012 SOP votes, and includes charts looking at 2011 and 2012 SOP votes, change in CEO total compensation, and TSR and percentile rank against companies’ GICS groups.
http://www.exqty.com/Media/Publications/Exequity%20Hauder%20Article%20PBD%20Oct.%209%202012.pdf
On Tuesday, October 9, 2012, Ed Hauder, Senior Advisor at Exequity LLP, will be participate in two panels during the Say-on-Pay Workshop: 9th Annual Executive Compensation Conference in New Orleans . Ed will participate in these panels:
- How to Work with the Proxy Advisors: Navigating the Say-on-Pay Minefield
- Say-on-Pay: How to Tackle All the Hot Button Issues
For more information, please see the conference website which includes sign-up links and the agenda and gives details about the host hotel for the conference in New Orleans. The conference website is:
So far in the 2012 proxy season (generally over now for calendar-year companies), 55 companies have reported failed SOP votes, a bit higher than the 44 SOP failures I reported for all of 2011. Here’s the list of failed SOP votes for 2012 as of July 11, 2012:
So far in 2012, 49 companies have reported failed SOP votes, now slightly higher than the 44 SOP failures I reported for all of 2011. Here’s the list of failed SOP votes for 2012 as of June 12, 2012:
In looking at the companies that had “failed” SOP votes in 2011, it now looks like five (5) had their SOP votes “fail” in 2012 as well:
- Cooper Industries
- Hercules Offshore
- Kilroy Realty
- Nabors Industries
- Tutor Perini
Support for several other SOP votes at companies with 2011 SOP failures have come in under 70%:
- Cogent Communications Group, Inc. – 68.45%
- Janus Capital Group Inc. – 61.38%
- Nutri System – 66.23%
- Weatherford International – 54.49%
All of these companies will come under closer scrutiny by ISS next year as a result. Those five (5) companies with 2 successive years of failed SOP votes (depending on how you count abstentions), will have a difficult time with their shareholders and may have to consider making some substantial changes in order to turn things around next year.
The chart below tracks the votes that have been recorded so far at companies that had SOP votes fail to secure a majority of the votes in their 2011 SOP votes (click on the graphic to expand it to readable size).
The chart below details the SOP failures in 2012 through May 15, 2012 (click on the table to magnify). I picked up one failure from early int he season (Actuant) and added a few more since last week. In total, I’ve tracked 33 SOP failures so far in 2012, about the same as the 2011 proxy season.
The Conference Board and FactSet Research Systems Inc. just released a Proxy Voting Fact Sheet that gives a good overview of the 2012 proxy season through April 2012. The publication looks at shareholder proposals and details the voting results on Management Say on Pay proposals and includes the outcomes on these votes. The Proxy Voting Fact Sheet is available at: https://www.conference-board.org/publications/publicationdetail.cfm?publicationid=2218 (an account or registration is required).
The chart below details the SOP failures in 2012 through May 15, 2012 (click on the table to magnify).
Also note that a new SOP Failures page has been added to this blog with failures arranged by year to make tracking a bit easier.
So far in the 2012 proxy season, it had been looking like all the companies that had SOP votes “fail” last year were coming back this year with significantly positive votes in support of their SOP proposals this year, see the April 25, 2012 Blog post. Since then, the support for several SOP votes at companies with 2011 SOP failures have come in under 70%, with one SOP vote that failed to garner more than 50% support:
- Cogent Communications Group, Inc. – 68.45%
- Cooper Industries plc – 29.36% (“failed” SOP)
- Janus Capital Group Inc. – 61.38%
All of these companies will come under closer scrutiny by ISS next year as a result. I imagine that Cooper Industries, with 2 successive years of failed SOP votes (depending on how you count abstentions), will have a difficult time with its shareholders and may have to consider making some substantial changes in order to turn things around next year.
The chart below tracks the votes that have been recorded so far at companies that had SOP votes fail to secure a majority of the votes in their 2011 SOP votes (click on the graphic to expand it to readable size).
