The Advisors' Blog

– Broc Romanek, CompensationStandards.com

Last week, Andrea Electronics became the 62nd company to fail its say-on-pay in ’13 – see the Form 8-K – with 41% support. Hemispherx Biopharma became the 63rd with just 43% support (Form 8-K), a microcap that voluntarily put up its SOP for a vote the past 3 years (failing in both 2010 and 2011 but passing last year).

And the 64th failure is LookSmart, which received ZERO votes in support of its say-on-pay. You say “bull”? Take a look at the company’s Form 8-K. The company is a former search engine from the dot.com era that is now an online ad enterprise. As gleaned from the company’s proxy statement, the NEOs don’t own any stock in the company. Here’s the analysis

Apparently, there was a complete board turnover in early 2013 (following a tender offer takeover), with the proxy explicitly stating that the former directors and executives were “terminated for cause or removed for cause or otherwise ceased to hold any office or position with the Company” (wow) – and the new board actually recommended AGAINST the company’s say on pay proposal. The proxy actually states “The current directors of the Company and the current compensation committee members believe that the executive compensation and the related practices of the former directors and former executive officers were ineffective and inappropriate and that the former directors and former executive officers consistently awarded themselves excessive compensation without regard to performance or what was in the best interests of the stockholders.” (double wow)

With 64 failures, this year now surpasses last year’s 61 failures. And we had three failures later in the year than at this time in 2012, so stay tuned. Thanks to Karla Bos of ING for the heads up on these!