Say on Pay: Boards Listen When Shareholders Speak

Shareholders have now had two years to express their views on executive pay, and a theme has emerged: They have no problem approving generous compensation packages, provided they’re getting richer too. When a company’s stock falls, they are not so agreeable.

The Dodd-Frank financial reform law enacted in 2010 calls for companies to submit executive compensation plans to nonbinding shareholder votes at least once every three years. This year there have been some notable nays. In April, Citigroup shareholders refused to endorse Chief Executive Officer Vikram Pandit’s $14.8 million package after the stock fell 44.3 percent in 2011. In May they voted four to one against the $5.8 million Chiquita Brands awarded CEO Fernando Aguirre following a 41 percent decline in the stock in 2011—even after the board said that the company’s poor performance had cost Aguirre his bonus.