With 'say on pay,' shareholder activism returns

Corporate shareholders in a variety of industries have been seeking to have more of a role in advising company boards on executive compensation and related issues. It's the latest strain of shareholder activism, a phenomenon that surges in difficult stock market and economic conditions, but tends to wane when happy days are here again.

Telecom companies such as Verizon Communications and Motorola were among the first to allow "say on pay" advisory votes on executive compensation, and more companies' stock-owners are seeking to do the same. Measures allowing shareholders with at least 10 percent stock ownership to call special meetings also are gaining traction. And, according to the Chicago Tribune, the most recent boost to the whole effort came in legislation introduced by Sen. Charles Schumer (D-N.Y.), who has called for a "bill of rights" for corporate shareholders, a set of guidelines that would include "say on pay" votes.

Still, as Washington Technology recently reported, "say on pay" measures and other shareholder activism moves have yet to find sustained footing at many telecom firms. For example, the publication said that proposals related to shareholder input on executive compensation failed to find enough support from Qwest Communications shareholders. A similar proposal misfired at Frontier Communications. Also, while Verizon has its "say on pay" advisory vote, a proposal that would require shareholder approval of death benefits for executives failed to garner enough support.

While interest in greater shareholder participation is growing, it remains to be seen whether or not it will remain a permanent condition. Will shareholders forget all about these measures the next time the Dow hits 14,000? It also is not clear how seriously corporate boards might take "say on pay" votes as they actually address the issue of executive compensation. To date, there doesn't appear to be such a thing as a binding "say on pay" vote.

At a time when many telcos continue to dish out executive bonuses or pay raises while they also cut jobs, the shareholder's voice appears to be more necessary than ever, but is anyone listening? Even if they say they are listening to newly activist shareholders, how will they demonstrate that the words they are hearing are having any impact?

-Dan [1]

For more:
- The Chicago Tribune has this story [2]
- Washington Technology has this report [3]