The Advisors' Blog

– Fred Cook, Frederic W. Cook & Co.

I love Pearl Meyer. I really mean it. She’s a pioneer, an icon, and a free spirit. And she speaks her mind, but not frequently. So when she does, attention must be paid. But I have a different idea for Say-on-Pay than the one she expresses in her recent blog.

I believe that a mandatory vote on Say-on-Pay vote each year for all public companies is overkill. There are approximately 10,000 US public companies. Pay practices that investors and the public regard as abusive are likely limited to a tiny fraction of these. So why impose an annual burden on the whole of private enterprise that is publicly owned?

My idea is to use a rifle rather than a shotgun to target the companies that have abusive practices. Let’s have the stock exchanges require that any company whose compensation committee chair receives 10% or more WITHOLD votes must submit its pay program to a advisory Say-on-Pay vote the following year, and every year thereafter until the negative vote drops under 10%.

That way shareholder activists and watchdog groups can target those companies with poor practices for Say-on-Pay, while leaving the vast majority of American businesses that have perfectly defensible executive pay practices alone.