The decision by Aflac--the insurance company known for its television commercials featuring a talking duck--to give shareholders an annual advisory vote on executive pay practices may prompt other major U.S. companies to follow suit.

Over a dozen large companies, including Tyco, Pfizer, Schering-Plough, J.P. Morgan Chase, Intel, and Prudential, have joined pension fund and investor representatives in a working group to discuss possible non-binding votes on compensation, known as "say on pay." Some of the companies involved with the group, such as Colgate-Palmolive, did not receive "say on pay" proposals this year, but still want to explore the possibility of shareholder review on compensation.

"We can say with assurance that close to a dozen companies ... believe the concept has considerable merit," said Timothy H. Smith, senior vice president of Walden Asset Management, a Boston-based fund for socially responsible investing and one of the founding partners of the working group, "but they need to do due diligence to see how it would be put to effect in the U.S. market."

The idea of an investor-issuer working group is not new. In early 2005, the United Brotherhood of Carpenters and Joiners of America, the Sheet Metal Workers International Association, and other labor pension funds founded a work group with companies like Bristol-Myers Squibb, Cinergy, Time Warner, and Chevron to address majority voting in director elections.

The United Kingdom, Sweden, and Australia already have advisory votes on executive pay, while the Netherlands has binding compensation votes. The U.K. rule has been in place since 2002 and has had a significant dampening effect on rising executive pay, according to a study of the 100 largest British companies by London-based New Bridge Street Consultants.

The idea of "say on pay" is catching on among U.S. shareholders. Last year, a first-time proposal filed by the American Federation of State, County, and Municipal Employees (AFSCME) and other investors averaged about 40 percent support at seven companies. AFSCME is one of the founding organizations in the "say on pay" working group, which also includes TIAA-CREF, the Connecticut Retirement Plans and Trust Funds, F&C Asset Management, Hermes, and the Universities Superannuation Scheme of the U.K.

This year, 52 advisory vote proposals are pending, many of them filed by a network of investors nationwide, including Walden, AFSCME, the New York City Employees' Retirement System (NYCERS), and the AFL-CIO. Four proposals so far have been withdrawn.

Georgia-based Aflac is the only U.S. company so far that has publicly said it will give shareholders a vote on executive compensation. Aflac Chairman and CEO Daniel P. Amos consulted with the board and with shareholders, including Smith at Walden, and decided to go ahead with the advisory vote after the company received a proposal from Boston Common Asset Management.

"Our shareholders, as owners of the company, have the right to know how executive compensation works," Amos said in a Feb. 14 press release.

The measure will not go into effect until 2009. By then, Aflac will have released three years of compensation data under the U.S. Securities and Exchange Commission's new rules on executive pay disclosure. The SEC approved the rules in July in an attempt to provide investors a clearer picture of companies' pay practices and related-party transactions.

"We expect that it will become easier for additional companies to embrace 'say on pay,' now that Aflac has opened the door as the first adopter of a shareholder advisory on CEO pay," Richard Ferlauto, director of investment policy at AFSCME, told Governance Weekly.

Aflac's decision may set a standard for other companies to follow, as other frontrunners in corporate governance have done in the past. "Chances are, anything [other firms] adopt now is going to be called 'the Aflac model,' kind of like how Intel and Pfizer reaped the benefits of being the early adopters" on majority voting bylaws and director resignation requirements," said Patrick McGurn, vice president and special counsel to ISS.

Apart from the companies involved in the "say on pay" working group, Smith said, corporate responses to the idea range from cautiously pessimistic to outright negative. Some companies are skeptical that an advisory vote on pay will have the same effect in the U.S. as it does abroad, owing to market differences. Other firms say that a simple up-or-down vote is not specific enough to indicate the particular pay practices (e.g., bonuses, stock option grants, or retirement benefits) that investors may object to.

Some companies, Smith said, would like to see how investors react to new compensation disclosures before committing to an advisory vote.