Examples of Effective Say-on-Pay Disclosures
Drafting models for the upcoming proxy season can be found from issuers who voluntarily provided say-on-pay disclosures or were required to do so under banking legislation. You can also see our sample language for a say-on-pay proposal under the proposed rules here. Here are some examples we found, with some associated commentary. You have to be carful to craft your proposals, because 2012 CD&A’s will require subsequent disclosures.
Microsoft—September 29, 2009
We have adopted an advisory vote every three years (a “triennial” vote), which we believe will be the most effective means for conducting and responding to a say-on-pay vote.
Although the vote is non-binding, Board and the Compensation Committee will review the voting results. To the extent there is any significant negative say-on-pay vote, we would consult directly with shareholders to better understand the concerns that influenced the vote. The Board and the Compensation Committee would consider constructive feedback obtained through this process in making future decisions about executive compensation programs.
Commentary: Note that disclosures like the above must be crafted with care. The proposed say-on-pay rules will require disclosure in subsequent CD&A’s “[w]hether and if so, how the registrant has considered the results of previous shareholder advisory votes on executive compensation required by section 14A of the Exchange Act . . . and previous shareholder advisory votes on executive compensation required by §240.14a-20 of this chapter in determining compensation policies.”
SUPERVALU—May 12, 2010
The Board of Directors of the Company is providing SUPERVALU stockholders with the opportunity to advise the Board as to whether SUPERVALU should conduct an advisory vote with respect to its executive compensation policies and procedures at every third annual meeting of stockholders, beginning with SUPERVALU’s 2011 Annual Meeting of Stockholders. If this proposal is approved, SUPERVALU stockholders would vote at every third SUPERVALU annual meeting of stockholders on the compensation policies and procedures as described in the “Compensation Discussion and Analysis” section of the proxy statement for that meeting. The triennial advisory vote would be non-binding, but the Board and the Leadership Development and Compensation Committee (the “Compensation Committee”) would take into account the outcome of the vote when making future decisions about the Company’s executive compensation policies and procedures.
SUPERVALU’s compensation program is designed and administered by the Compensation Committee of the Board, which is composed entirely of independent directors and carefully considers many different factors, as described in the Compensation Discussion and Analysis, in order to provide appropriate compensation for our executives. Our executive compensation program is intended to attract, motivate and reward the executive talent required to achieve our corporate objectives and increase stockholder value.
The Compensation Committee has designed our compensation program to be competitive with the compensation offered by those peers with whom we compete for executive talent. Targets for base salaries, annual cash incentive and long-term incentive awards for executives are based on competitive data. The fact that a large proportion of our executive officers’ total compensation is performance-based is intended to align their interests with those of our stockholders and place more of their compensation at risk and emphasize a long-term strategic view. The Compensation Committee deliberately designs compensation objectives in order to allocate a significant percentage of each of our NEOs’ compensation to performance-based measures.
While the Board of Directors believes that the Compensation Committee and the Board of Director are in the best position to determine executive compensation, the Board appreciates and values stockholders’ views and supports management’s proposal for a triennial advisory vote on executive compensation. The ability of stockholders to provide an advisory vote on executive compensation has been the subject of proposed legislation in the United States Congress, as well as stockholder proposals and management initiatives at a number of publicly-held companies. A stockholder proposal in favor of implementing Say on Pay was presented at our 2009 Annual Meeting of Stockholders and was approved by a narrow margin. The Board has continued to review the evolution of Say on Pay over the past year and has carefully studied the alternatives to determine the approach that will best serve the Company and our stockholders. The Board has determined that a three-year advisory vote on executive compensation is the best approach for SUPERVALU based on a number of considerations, including the following:
- Our compensation program is designed to induce and reward performance over a multi-year period. As discussed in the Compensation Discussion and Analysis, beginning with fiscal 2010, the Compensation Committee changed the design of its performance share program from a two-year performance cycle to a three-year performance cycle. The Board has concluded that Say on Pay votes should occur over a similar timeframe;
- A three-year cycle will provide investors sufficient time to evaluate the effectiveness of our short- and long-term compensation strategies and the related business outcome of the Company;
- Many large stockholders rely on proxy advisory firms, which evaluate the compensation programs of over 12,000 public companies, for vote recommendations. We believe holding Say on Pay votes every three years, rather than annually, helps proxy advisory firms provide more detailed and thorough analyses and recommendations;
- A three-year vote cycle gives the Board and the Compensation Committee sufficient time to thoughtfully respond to stockholders’ sentiments and to implement any necessary changes to our executive compensation policies and procedures;
- Rules of the New York Stock Exchange require the Company to seek stockholder approval for new employee equity compensation plans and material revisions thereto. This requirement provides our stockholders with the opportunity to provide additional feedback on important matters involving executive compensation even in years when Say on Pay votes do not occur; and
- The Board will continue to engage with our stockholders on executive compensation during the period between stockholder votes. As discussed under “Other Information — Communications with the Board of Directors,” the Company provides stockholders an opportunity to communicate directly with the Board of Directors, including on issues of executive compensation.
The Board of Directors is making this recommendation on its own initiative, while recognizing that Say on Pay proposals continue to be under consideration in the United States Congress. SUPERVALU will of course comply with any requirements that emerge either through federal or state legislation or through regulatory changes adopted by the SEC, and any such requirements will supersede this proposal to the extent they are inconsistent.
Winn Dixie—October 4, 2010
The Board of Directors is providing shareholders with the opportunity to cast an advisory vote on the compensation of our named executive officers. This proposal, commonly known as a “say on pay” proposal, gives you, as a shareholder, the opportunity to endorse or not endorse our fiscal 2010 executive compensation programs and policies and the compensation paid to the named executive officers. Our Governance Principles currently provide that this advisory “say on pay” vote will be provided to our shareholders on a biennial basis, although we note that the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) will require a say on pay vote at our 2011 annual meeting, as well as an advisory vote with respect to whether future say on pay votes will be held every one, two or three years. We expect that our Board of Directors will review our Governance Principles in view of the say on pay vote required under the Dodd-Frank Act and also after our shareholders express their preferences for having say on pay votes every one, two, or three years.
As discussed in the Compensation Discussion and Analysis section of this Proxy Statement, our compensation principles and underlying programs are designed to attract, motivate and retain key executives who are crucial to our long-term success. The compensation paid to our named executive officers reflects the following principles of our compensation program:
- We structure our executive compensation programs within a framework that measures performance using a variety of financial and non-financial metrics. We do this to promote and reward actions that strengthen the Company’s long-term health while promoting strong annual results
- We make annual compensation decisions based on an assessment of each executive’s performance against goals that promote the Company’s success by focusing on our shareholders, customers and employees. We focus not only on results but on how results were achieved.
- We structure our executive compensation programs to be consistent with and support sound risk management. We have reviewed the design and controls in our incentive compensation program to assess the effectiveness of the program and our compensation practices in controlling excessive risk.
- In fiscal 2010, implementation of our “pay for performance” incentive plan caused all of our NEOs to receive Annual Incentive Plan payouts that were 80% lower than their target bonus opportunities. This translated into a 40% reduction in total cash compensation (salary and annual incentive award) for our CEO, and an average of 35% reduction in total cash compensation for our other NEOs.
- In fiscal 2010, we made a one-time performance grant to our named executive officers which included performance criteria under which the shares vest only in the event such criteria are met.
- We require substantial stock ownership by our named executive officers.
- We have a clawback policy that allows the recoupment of performance-based compensation from any executive officer whose fraud or misconduct may cause the Company to restate its financial statements . . .
This vote will not be binding on or overrule any decisions by the Board of Directors, will not create or imply any additional fiduciary duty on the part of the Board, and will not restrict or limit the ability of our shareholders to make proposals for inclusion in proxy materials related to executive compensation. The Compensation Committee will take into account the outcome of the vote when considering future compensation arrangements for our named executive officers.
Commentary: Note that under certain circumstances, under the proposed rules, a say-on-pay vote can restrict certain shareholder proposals in the future. See the proposed modification to Rule 14a-8.
Cisco—September 28, 2010
Executive compensation is an important matter for our shareholders. The core of Cisco’s executive compensation philosophy and practice continues to be to pay for performance. Cisco’s executive officers are compensated in a manner consistent with Cisco’s strategy, competitive practice, sound corporate governance principles, and shareholder interests and concerns. We believe our compensation program is strongly aligned with the long-term interests of our shareholders. We urge you to read the Compensation Discussion and Analysis (“CD&A”) section of this proxy statement for additional details on Cisco’s executive compensation, including Cisco’s compensation philosophy and objectives and the 2010 compensation of the named executive officers.
Although Congress has recently enacted legislation requiring a non-binding advisory Say on Pay vote on executive compensation beginning in 2011, in accordance with the vote of our shareholders at the 2009 Annual Meeting, we want to give our shareholders an advisory vote on executive compensation at our 2010 Annual Meeting. Next year, in accordance with the recently enacted legislation, in addition to an advisory Say on Pay vote, we will ask shareholders whether they would prefer an advisory vote every year, every two years or every three years . . .
As an advisory vote, this proposal is non-binding. Although the vote is non-binding, the Board of Directors and the Compensation Committee value the opinions of our shareholders, and will consider the outcome of the vote when making future compensation decisions for our named executive officers . . .
The affirmative vote of a majority of the shares of Cisco common stock present or represented by proxy and voting at the annual meeting, together with the affirmative vote of a majority of the required quorum, is required for approval of this proposal. If you own shares through a bank, broker or other holder of record, you must instruct your bank, broker or other holder of record how to vote in order for them to vote your shares so that your vote can be counted on this proposal.
Aflac—March 19, 2009
We believe that our compensation policies and procedures are centered on a pay for performance culture and are strongly aligned with the long-term interests of our shareholders. This advisory shareholder vote, commonly known as “Say-on-Pay,” gives you as a shareholder the opportunity to endorse or not endorse our executive pay program and policies through the following resolution . . .
Because your vote is advisory, it will not be binding upon the Board. However, the Compensation Committee will take into account the outcome of the vote when considering future executive compensation arrangements.
We believe the “Say-on-Pay” proposal demonstrates our commitment to our shareholders; that commitment extends beyond adopting innovative corporate governance practices. We also are committed to achieving a high level of total return for our shareholders.
Since August 1990, when Mr. Daniel Amos was appointed as our CEO through December 31, 2008, our Company’s total return to shareholders, including reinvested cash dividends, has exceeded 2,852% compared with 418% for the Dow Jones Industrial Average and 309% for the S&P 500.
Goldman Sachs—April 6, 2009
Our Board is committed to and recognizes the importance of responsible executive compensation practices. As described above under Compensation Discussion and Analysis, our Compensation Committee, at the request of our Senior Executives, determined not to pay bonuses to these executives, including our NEOs, for fiscal 2008. This was done because, in light of the circumstances, it was the right thing to do.
Our Board and our Compensation Committee believe that our commitment to these responsible compensation practices, as evidenced by the determinations made with respect to 2008 compensation to our NEOs, justifies a vote by shareholders FOR the resolution approving the compensation of our NEOs as disclosed in this Proxy Statement.
Check dodd-frank.com frequently for updates on the Dodd-Frank Act and other important securities law matters.
Contact Steve Quinlivan for more information.