Golden Parachutes Stay Afloat in Initial 2011 Proxy Votes, According to Pearl Meyer & Partners Study

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But Shareholders More Supportive of Proposed Mergers than Related Executive Payouts

NEW YORK--(BUSINESS WIRE)-- Initial results indicate shareholders supported executive pay arrangements related to corporate mergers in 2011 proxy votes, although they were decidedly more enthusiastic about the transactions themselves, according to an analysis of 2011 proxy votes by compensation consultants Pearl Meyer & Partners. The study looked at the results of newly required shareholder advisory votes called Say on Golden Parachutes (SOGP), which relate to management payouts that would be triggered by a corporate change-in-control.

“Despite some earlier concerns, shareholders didn’t withhold support for golden parachutes as a way to protest perceived executive compensation levels,” said Margaret Black, Managing Director at Pearl Meyer & Partners. “Proposed pay programs were supported as long as shareholders believed that the underlying financial transaction made sense for the company.”

Under new SEC rules, as of April 25 companies must give shareholders an advisory vote on any compensation that would be paid to executives in relation to a proposed corporate transaction being brought to a vote. Such “golden parachutes” may include stock options, bonuses, severance pay or other payments triggered by the change-in-control. The SEC this year also required that all public companies hold Say on Pay and Say on Frequency advisory votes in connection with their regular executive pay programs.

There were 37 SOGP votes tracked by Pearl Meyer & Partners since the rule’s inception, of which 24 companies reported final results as of September 26. Pearl Meyer & Partners found that in contrast to a 99% median level of shareholder support for the proposed corporate transactions, 91% voted in favor of the related executive pay arrangements. In addition, while relatively few shareholders abstained on the transactional votes, there were considerably more abstentions for many of the SOGP votes.

Influence of Advisory Firm Recommendations

Major shareholder advisory firms such as Institutional Shareholders Services (ISS) issued voting recommendations on all the new advisory votes and there was some question about their impact on outcomes. The study found that of the four SOGP proposals for which ISS recommended a negative vote – all on the basis of “poor pay practices” – three of the companies received majority shareholder support, albeit in some cases at a significantly lower level than other proposals. The fourth company has not yet reported voting results.

The Say on Golden Parachute White Paper is available at http://pearlmeyer.com/SOGP2011.

About Pearl Meyer & Partners

For more than 20 years, Pearl Meyer & Partners (www.pearlmeyer.com) has served as a trusted independent advisor to Boards and their senior management in the areas of compensation governance, strategy and program design. Clients rely on Pearl Meyer & Partners to develop programs that align organizational rewards with long-term business goals to create value for all stakeholders: shareholders, executives, and employees.