Views on improving the integrity of global capital markets
19 May 2011

Say on Pay 2011 Update: 20 Negative Votes and Counting

I’m a bad gambler.

Soon after a mandatory vote on “say on pay” became the law of the land last year, I made a friendly wager with a colleague in the corporate governance world about how many U.S. companies would fail to receive 50 percent support for their 2011 say-on-pay votes. I predicted 15, my friend guessed 30 (there were only a handful of such negative votes in 2010). I’m happy that we only made a gentleman’s wager whereby no money changed hands because, as of last week, the 20th U.S. company already had “lost” on its say-on-pay vote. I think I’m going to lose that bet.

The End Is Not Nigh (Please Read This Again after May 21 Just to be Sure)

Over the past few years, when the merits of a say-on-pay vote were hotly debated, some on the corporate side of the issue delivered fire and brimstone predictions that say on pay would open the door to an encroachment by shareowners to set executive pay when executive compensation is an issue that should fall to boards. Those against a say-on-pay vote also argued that giving shareowners such power would undermine the board’s ability to set pay strategies to successfully attract needed talent.

Investors do not want to set compensation; they just recognize when compensation and performance are misaligned — over both the short and long term. I would venture to guess that compensation and performance are out of sync at more than just the 20 U.S. companies that have had a proxy vote thus far this year. Indeed, considering the thousands of U.S. companies that have already held their annual proxy votes this year, it is likely that more than 20 have compensation systems that do a poor job of aligning management and shareowner interests.

The Key to Any Relationship Is Communication

The institutional investors we talk to — and it is institutional voters who cast the vast majority of these votes — tell us that they have no interest in setting pay, that compensation committees should do that.  What they do want is to be listened to when they feel there is a disconnect between pay and performance, and to have constructive conversations with companies about how to set things right.

Let’s Keep Score

The say-on-pay vote is, at its heart, a communications tool. Boards do not want to receive negative votes, so they will make sure they address shareowner concerns in order to stay in the good graces of their investors. A negative say-on-pay vote is a way for shareowners to send the board a message: “We need to talk.”

The real proof of whether the new say-on-pay vote rule is a success will be in how companies receiving a negative vote this year work with their shareowners to avoid a negative vote the next time. For those results, we will have to wait until next year. In the meantime, glancing at recent 8-K reports suggests that some companies are more likely to begin constructive conversations than others. Below are the names of the four companies that received negative say-on-pay votes last week, and the response to the vote (if any) they gave in their most recent 8-K filing.

Helix Energy Solutions Group

“This proposal did not receive a majority of the votes cast; accordingly the shareholders did not approve the 2010 compensation of our named executive officers. Although this is a non-binding advisory vote, the Compensation Committee of the Board of Directors values the opinion of our shareholders and as a result has determined to take the following actions: (i) implement defined performance metrics for the 2011 Cash Bonus Program for executive officers with the Committee, however, retaining overall discretion with respect to the grant of individual awards made under the program, and (ii) modify the long-term incentive compensation awarded to executive officers to include additional pay for performance elements in future grants.”

Curtiss-Wright Corp.

“Curtiss-Wright’s Senior Management, Executive Compensation Committee, and Board of Directors will consider the results of this vote and look at ways to factor the shareholders’ views into enhancements in our executive compensation system.”


No comment concerning the negative say on pay vote was contained in the most recent 8-K.

Cincinnati Bell Inc.

No comment concerning the negative say on pay vote was contained in the most recent 8-K.

Related Post: Early Returns from “Say on Pay

About the Author(s)
Matt Orsagh, CFA, CIPM

Matt Orsagh, CFA, CIPM, is a senior director of capital markets policy at CFA Institute, where he focuses on corporate governance, ESG, and climate change analysis. He writes and speaks frequently on these topics on behalf of CFA Institute. His paper, Climate Change Analysis in the Investment Process was named “Best ESG Paper” by Savvy Investor in 2021.

3 thoughts on “Say on Pay 2011 Update: 20 Negative Votes and Counting”

  1. hasher says:

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  2. over here says:

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  3. Matt Orsagh says:

    The template is called the Compensation Discussiona & Analysis (CD&A) Template – and can be found at the following link:

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