This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Congress Got 'Say-on-Pay" Right

NEW YORK ( TheStreet) -- It's easy to bash many aspects of the Dodd-Frank banking reform legislation, but Congress sure got it right when requiring "say-on-pay" for shareholders.

The Dodd-Frank Wall Street Reform and Consumer Protection Act -- signed into law by President Obama in July 2010 -- has certainly created a rocky landscape for the banking industry, with numerous threats to revenue streams and confusing and contradictory requirements -- such as the Volcker Rule -- which even has the Federal Reserve and other regulators scratching their heads.

Under the Securities and Exchange Commission's final rules, publicly traded U.S. companies are required to provide shareholders with an advisory vote on executive compensation at least once every three years, and beginning in 2011, with shareholders also voting to decide whether to hold say-on-pay votes annual, every two years, or every three years.

The rules also require "say-on-parachute," with companies required to provide additional disclosure regarding compensation arrangements with executive officers in connection with merger transactions."

While the shareholder advisory votes are non-binding, former Citigroup (C - Get Report) Chairman Richard Parsons wasn't just pandering when he said on April 17 that shareholders' vote against the company's 2011 executive pay package -- which included total compensation of $14.9 million for CEO Vikram Pandit -- was a "serious matter."

Coming out of the credit crisis, following government bailouts and obscene losses for long-term investors, the last thing a large bank wants is a shareholder lawsuit against its executive pay packages. While Citigroup's board of directors hasn't yet taken any action to address shareholder concerns, investors expect the company to meet with some major stockholders and try to sort out an agreement.

Investors traditionally neglect to send in their annual proxies, leaving their brokers free to vote on their behalf, usually rubber-stamping whatever a company's board of directors decides to recommend. This is obviously changing in the wake of Dodd-Frank, and this can only be a good thing.

Mark Poerio -- a partner in the employment practice at Paul Hastings -- points out that even an advisory vote has "high litigation risk," since during 2011, "there were 40 companies that failed to get a majority vote" on say-on-pay, with "about 20% of the companies failing to get a majority vote getting sued for breaching fiduciary duties."

1 of 4

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
BAC $16.74 1.45%
C $54.87 1.16%
COF $84.63 0.81%
HBAN $11.27 1.26%
TCB $16.03 1.20%

Markets

DOW 18,162.99 +121.45 0.67%
S&P 500 2,123.48 +19.28 0.92%
NASDAQ 5,106.5930 +73.8420 1.47%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs