Investors' Say on Pay
As investors might have noticed, 2014 is shaping up to be a tougher year in stock markets than 2013, when both the Dow Jones Industrial Average and the S&P 500 Index surged to post-crisis highs.
Choppy stock markets and the prospect of a market pull back may bring some issues, for instance executive pay, to the forefront of discussion. Investors now have a so-called "say on pay," meaning they can vote in favor, abstain, or vote against executive compensation packages.
During the financial crisis, executive pay did not fall as sharply as stocks and in the years since the crisis, pay has risen significantly. With stock gains likely more muted and harder to come by in the fifth year of recovery from the crisis, shareholders may soon exercise their voice in executive compensation. In fact, they already are.
Warren Buffett recently called Coca-Cola's (KO) executive pay package "egregious" and abstained from voting for it. Carl Icahn, an activist investor, criticized Buffett for not voting against the package. Money managers such as Blackrock (BLK), CalPERS and T. Rowe Price have vowed to be more active voters.
Investors have a say on executive pay. Prepare to hear it.