The Advisors' Blog

We’ve blogged about the concept of “say-on-director-pay” from time to time around here. Most recently as part of the director compensation settlement at Tesla. That settlement led to a new development this season: a shareholder proposal at 13 companies for “Double Binding Director Say-on-Pay.”

The proposal is unique because it’s structured as a binding bylaw amendment (rather than a precatory request). This framing seems to be more popular this year – I blogged a few weeks ago on our Proxy Season Blog on TheCorporateCounsel.net about an “independent chair” proposal that was also submitted as a binding resolution. The bylaw provision would say:

Compensation. The compensation of directors the corporation pays shall be fixed at $1 in a f iscal year; provided, however, the corporation may pay, grant, or award compensation greater than $1 in a fiscal year if such compensation has been (1) disclosed to stockholders in advance of the fiscal year in which the corporation will pay, grant, or award such compensation; (2) submitted to an approval vote of stockholders at an annual or special meeting of stockholders in advance of the fiscal year in which the corporation will pay, grant, or award such disclosed compensation; and (3) approved by a majority of stockholder votes present in person or represented by proxies and entitled to vote cast in favor of the disclosed annual compensation at an annual or special meeting of stockholders in advance of the fiscal year in which the corporation will pay, grant, or award such compensation. In the fiscal year in which this Section [] takes effect, the Board shall continue to pay, grant, or award any such compensation that the Board has previously approved for such fiscal year.

If this proposal is approved, it means that director pay would be subject to an annual, binding vote. Directors could consider whether they would be excluded from participating in this vote. If you want more detail on this proposal (submitted by Michael Levin at The Activist Investor), check out the “Proxy Preview” report that I flagged last month. Michael recently shared this update about how the proposals are faring. Here are key points:

1. Going to a vote at 5 companies (NiSource on May 13th, PayPal on May 22nd, Fortiv, Alphabet, and Devon Energy)

2. Excluded with no-action relief at 6 companies, based on the argument that excluding directors from the vote would violate state law (Michael says “he won’t make that mistake again”)

3. 2 companies still in process

It will be interesting to see the voting results. Michael implies that there will be more proposals to come…

– Liz Dunshee