The one-year-old Dodd-Frank Wall Street Reform and Consumer Protection Act requires public companies to give shareholders the right to a nonbinding advisory vote on executive compensation. Companies also are required to let shareholders vote on how frequently the so-called "say-on-pay" votes are held -- typically every one, two or three years.
This year's votes are in and, surprise, surprise, shareholders have voted overwhelmingly with management on the pay packages of top executives. But it also seems clear that nearly all shareholders want to scrutinize compensation packages annually.
At the 18 largest Minnesota-based public companies to hold votes so far this proxy season, the proportion of yes votes to no votes was more than 90 percent at all but two companies. And at those two -- U.S. Bancorp and Ameriprise Financial -- the ratio was 88 percent.
Equilar, an executive compensation data firm, has analyzed the proxies of 2,252 companies out of the Russell 3000 Index that held their annual meetings between Jan. 21 and June 30. Shareholders rejected management's pay practices at just 38 companies. And almost 75 percent of firms won their votes with 90 percent or higher approval. None of the companies that failed their say-on-pay votes was from Minnesota.
Yet shareholders have shown a willingness to go against board recommendations. As part of the Dodd-Frank reforms, companies were required to give shareholders the option to have an advisory vote on shareholder compensation every year, every two years or every three years. Shareholders overwhelming voted to have an annual say-on-pay vote even when some boards recommended a vote every three years.
Best Buy, U.S. Bancorp, Valspar, Polaris Industries and Toro were the only boards in the group that recommended a say-on-pay vote every three years. But shareholders at each company ended up choosing an annual vote. Heeding the wishes of shareholders, U.S. Bancorp, Toro, Best Buy and Valspar quickly adopted the annual vote.
But Polaris took from April 28, the date of its annual meeting, until July 20 to finally adopt the annual vote. And in a filing Aug. 5, Polaris signaled that it's unhappy with the annual vote. "As a result of the narrow margin of the voting results, the board of directors voted to submit the frequency vote to shareholders again at next year's 2012 annual meeting of shareholders."
Our guess? Polaris shareholders will once again choose the annual vote. And given the overwhelming shareholder support for pay packages, what's Polaris worried about?