Meanwhile, corporate antipathy toward “say-on-pay” shareholder provisions seems likely to fade even though many experts say such policies lack nuance. “It’s a blunt instrument,” asserts Russell Miller, managing director of Executive Compensation Advisors, a division of executive search firm Korn/Ferry International. “Shareholders will be asked to vote either yes or no. It doesn’t give them the ability to vote on the merits or detractions of various elements within compensation programs, or to engage in any kind of meaningful discussion with management.” Then again, most such provisions are nonbinding anyway, which once again puts compensation committees on the line as they debate whether to act on such votes. — R.B.
Laying Out the Tarp
Notable executive-pay rules within TARP legislation include:
• A prohibition on cash bonuses and incentive compensation other than restricted stock for the top five officers and others
• A prohibition on bonuses to these top executives in excess of one-third of their annual compensation, until the TARP loans are repaid
• Stringent “clawback” provisions requiring TARP recipients to recover performance-based compensation awarded to the top executives if the bonuses were based on statements of earnings, revenues, gains, or other criteria that are later found to be materially inaccurate (The new rule stiffens the clawback provisions of the Sarbanes-Oxley Act of 2002, which addressed only CEO and CFO pay.)
• A “say-on-pay” provision permitting shareholders to vote “for” or “against” a public company’s executive-compensation program
• An end to “golden parachutes,” as well as other restrictions on severance payments
• The effective banning of such executive perquisites as free country-club memberships and chic office remodels — R.B.