Section 951 of the Dodd-Frank Wall Street Reform and Consumer Protection Act requires, among other actions, that “[n]ot less frequently than once every 6 years, a proxy or consent or authorization for an annual or other meeting of the shareholders for which the proxy solicitation rules of the [SEC] require compensation disclosure shall include a separate resolution subject to shareholder vote to determine whether [the say-on-pay vote] will occur every 1, 2, or 3 years.” This shareholder vote is not binding on a company or its board of directors. Since most public companies conducted their first so-called “say-on-pay frequency” shareholder vote in 2011, the upcoming 2017 proxy season will be the second time that such advisory vote will take place on the minimally required six-year voting cycle.
This corporate governance update (1) provides general background information regarding say-on-pay frequency, including arguments a board may consider when determining which say-on-pay frequency it should next recommend, (2) summarizes the current say-on-pay frequency policies and positions of several large asset managers and pension funds, leading proxy advisory firms and certain corporate governance advocates, to provide insight into the expectations of these entities with respect to say-on-pay frequency, and (3) presents practical considerations for boards to help facilitate discussion on the frequency with which say-on-pay is submitted to shareholder vote.
This Corporate Governance Quarterly Update was republished by Insights: The Corporate & Securities Law Advisor in its January 2017 issue. The republished article is posted with permission.
