The 2008 proxy season demonstrated strong steady support by a remarkable cross section of investors for the reform requesting that an Advisory Vote on Executive Pay be instituted by companies. Even though the number of companies where votes were held grew from 2007, the average vote remained constant around 42%.

In addition ten companies received votes of over 50% and the vast majority of votes were in the 40-49% range. For a second year resolution with a significant number of companies this is an unusually high voting plateau to reach. In addition there is a broad cross section of voting support, some very public and others more circumspect in their support, from T. Rowe price to TIAA-CREF.

With a number of financial companies the votes dropped, e.g. Citigroup, Merrill Lynch, and Morgan Stanley, which is puzzling since major compensation issues exist with those companies. It is hard to know if the reason is a change of the shareholder base because of sales and an influx of new investors. But it does not seem as though institutional investors are stepping back from their support of this reform. They tend to back it on principle, thus the confusion about voting shifts.
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From the point of view of proponents, these votes send a very strong message to company boards and management that this governance issue should be put on their agenda as a top priority for study and action. It is fascinating to see the range of responses, from companies committed to dialogue and careful study of the issue to companies which seem to hunker down and arrogantly ignore the feedback from shareowners. This is most frustrating when a resolution receives a 40 or even a 55% vote and the company refuses to talk.

Other companies are holding back to see what happens in the elections and if “say on pay” will become law. Looking forward, proponents plan to continue to raise this issue through resolutions with approximately 100 companies in 2009.