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Keeping Score: What Are Early Filers Doing About Say-on-Pay and Frequency Vote?

(The following post originally appeared on ONSecurities, a top Minnesota legal blog founded by Martin Rosenbaum to address securities, governance and compensation issues facing public companies.)

December 5, 2010

I’m getting a lot of questions from public companies lately that involve “keeping score.” In Say-on-Pay votes, what are other companies doing about drafting the resolution and the corresponding section in the proxy statement? In the frequency vote, are other companies recommending that shareholders approve holding the Say-on-Pay vote every one, two or three years? Of course, companies recognize that they need to make their own decisions. But no one wants to be an outlier. Plus, many companies with a calendar fiscal year end are holding board meetings in December, and management and in-house counsel want to be prepared if the directors ask, “What’s the score so far?”.

I know of at least six companies so far that have filed proxy statements (mostly preliminary proxies) that include the resolutions for Say-on-Pay and the frequency vote required under the Dodd-Frank Act: Johnson Controls, Inc., Visa Inc., Beazer Homes USA, Tyco Electronics, Woodward Governor Company and Ashland, Inc. And here’s the score.

Say-on-Pay: I don’t think there is anything unexpected in these six proxy statements. Pretty much all of the companies included some bullet points in the Say-on-Pay proposal describing some of the positive aspects of their pay practices, or the changes they have made in the past year to improve their programs. I’m sure there will be a lot of variations as more companies file in the next few months. However, I’ll bet a lot of the Say-on-Pay proposals will end up looking a lot like the ones already filed by these companies.

Frequency vote: The score for management recommendations is, three companies recommending a triennial vote; two companies recommending an annual vote. Interestingly, one company (Tyco) declined to take a position, stating that the Board “. . . has decided to consider the views of the company's shareholders before making a determination.” I think most companies will choose to recommend either a triennial or an annual vote. I think fewer companies will recommend biennial votes, which some perceive to have the appearance of a compromise.

Thanks to Mark Borges, who has been keeping track of proxy filings in his comprehensive Proxy Disclosure Blog on (subscription site).

Broadridge Says It’s “Prepared” to Include Four Choices on the Proxy Card

In its proposing release for the frequency vote rules (PDF), the SEC reported that some service providers might not be prepared to accommodate a proxy card with four choices (annual, biennial, triennial or abstain). Currently, IT systems for shareholder votes are set up for three choices (for, against or abstain). In response to concerns expressed by Broadridge Financial Solutions, Inc. and other vendors, the SEC indicated in the release that companies could include three choices on the proxy card (annual, biennial or triennial) if their vendors’ systems could not yet accommodate four choices.

Broadridge recently filed a comment letter (PDF) on the SEC’s proposed frequency vote rules. The letter says that modifications to the Broadridge systems to accommodate four choices are “well underway.” Broadridge says it estimates that the initial effort will require an investment of over 18,400 people hours, and that is prepared to support use of the new rules for shareholder meetings that occur on or after the January 21, 2011 effective date.

Of course, even the investment of 18,400 hours won’t guarantee that the vote will go off without a hitch. I have heard transfer agent representatives express concern that the data received by the transfer agent from Broadridge may be in a different format or difficult to tabulate. This should be an interesting year.


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