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May 05

Say on pay backers declare first victory

Posted by Stephen Taub in stock optionsSay on PayriskMetricsrestricted stockproxy accesspay for performancecompliancecompensation

Stephen Taub

"Investors Reject Motorola's Pay Practices," exclaims the headline on the blog posted by RiskMetrics.

The proxy advisory firm said Motorola received just 46 percent support during an advisory vote on its executive pay practices, citing as its source investors who attended the company's May 3 annual meeting.

So far, Motorola has not disclosed the results of the voting, not even on a preliminary basis.

But, if RiskMetrics is right, this is a big moment for the Say on Pay movement. It would be the first time that a U.S. company failed to earn majority support from shareholders during a non-binding vote on compensation, the firm claims.

"This year's vote appears to reflect investor concern about Motorola's pay-for-performance metrics," RiskMetrics asserted. "Other potential issues included insufficient details on the compensation committee's adjustments to Motorola's cash incentive plan and the existence of a modified tax gross-up provision in the employment agreement for Dr. Sanjay Jha, one of the company's co-CEOs."

Or, the anti-success wing of the union movement galvanized support to shoot down the pay packages en masse. Or...we don't really know.

And that's the problem with Say on Pay.

Sure, proponents of the non-binding exercise will assert this sends a loud message to Motorola's top executives and Board of Directors. But, what message did they really send?

Did shareholders really dislike the pay-for-performance metrics? Frown on the overall pay levels? Did they really only oppose one individual's deal? Which aspects? The cash payments? Option grants? Restricted stock?

Or were they just angry that some people make more money than they do?

We'll never know. Say on Pay does not have the flexibility or the forum for investors to express what exactly irked them about the pay table. They just give a thumbs up or thumbs down on everything pay-related-the named executives' total package, both cash and non-cash payments, the perks, pay-for-performance hurdles.

This is why opponents have some merit to their argument that Say on Pay has the potential to be politically and socially charged.

I just wish the SEC (or Congress) would pass Proxy Access, which would allow certain shareholders under certain circumstances to nominate their own slate of directors.

Sure, opponents of this policy believe this also would be politically and socially abused.

But, I don't think so. Ultimately, the directors would need to receive a high level of votes from all shareholders. And it would remove management's monopoly over selecting Board members.

Say on Pay is just one over-rated, inflexible mish mash.



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