More on “Say on Pay” Initiatives

The push to allow shareholders a “say on pay” continues to gain momentum in the wake of Aflac’s recent announcement last month that it was giving its shareholders a non- binding vote on executive pay. On March 4th, Apple Inc.’s shareholders approved a non-binding resolution urging Apple to give its shareholders input into executive compensation. Apple, is of course, free to ignore this request but will do so at its peril. Activist shareholders would prefer a more direct say in matters regarding executive compensation, and if the company ignores this fairly benign request, who knows what may happen next?

Meanwhile, on March 25th, Blockbuster, Inc. announced that its Board of Directors had adopted a say on pay policy giving shareholders a non-binding advisory vote on executive compensation beginning in 2009.

Executives at companies affected by say on pay initiatives invariably put a positive spin on their passage. Blockbuster’s Chief Executive Officer James Keyes stated in response to the shareholder vote that “Holding this advisory vote on executive compensation on an annual basis will not only improve dialogue with our shareholder base, it will also provide our Board with valuable feedback on our compensation policies, which currently link both bonus and equity compensation to Blockbuster's financial and operating performance.” Apple CEO Steve Jobs told shareholders “I hope this say on pay will help me with my $1 a year.” (Jobs earns just $1 per year in annual salary, but also is richly compensated through stock grants and travel budgets.)

We can certainly expect to hear more news of companies adopting say on pay initiatives in the coming weeks and months. The real impact of these plans may not be known for much longer. Will they calm shareholder fervor regarding executive compensation? Or will they simply fuel the fires of unrest if shareholder input continues to be ignored despite this new avenue for shareholder voice?