Sustainable investors have long
argued that excessive compensation encourages an unsustainable emphasis on short-term profits and
an appetite for risk-taking that are now seen as contributing factors to the financial crisis. In
May, 2010, when the Senate passed Dodd-Frank, Lisa Woll, CEO of the Social Investment Forum (SIF), said, "The most recent
financial crisis highlighted for all Americans the urgent need to instill greater discipline among
corporate boards and in financial markets…say on pay will help address these failures and
strengthen America's financial markets."
The rules adopted by the SEC require public
companies that are subject to the federal proxy rules to provide shareowners with an advisory vote
on executive compensation at least every three years. Companies must also provide shareowners with
a vote on the desired frequency of executive compensation votes every six years.
Shareowners must also be provided with an advisory vote on golden parachute arrangements
associated with merger transactions.
Larger public companies must provide shareowners with
a vote on executive compensation at their first annual general meeting held on or after Jan. 21,
2011. Companies with a market capitalization of less than $75 million will be permitted to delay
adoption of the rules until annual meetings occurring on or after Jan. 21, 2013.
financial crisis led to a marked increase in the number of shareowner proposals addressing
executive compensation, and, in many cases, a higher vote count in support of such proposals. In
2010, for instance, a majority of shareowners voted to adopt a say-on-pay proposal at Chesapeake
Energy, while at Motorola, a management proposal to ratify executive compensation received only
However, as a report published in December by the Council of
Institutional Investors (CII) pointed out, none of the six major post-crisis Wall Street banks
"has addressed adequately the importance of tying compensation to long-term value growth."
Furthermore, the report continued, "More vigorous federal oversight of Wall Street does not
appear to have changed compensation on the Street for the better."