Correction to This Article
A graphic with a Feb. 15 Business article on corporate-governance-related shareholder proposals contained errors from the original data source. There have been 119 proposals related to takeover defenses, not 27, and 37 in the miscellaneous category, not 129.

Score One for Dissent

Robert L. Nardelli collected more than $200 million when he left Home Depot.
Robert L. Nardelli collected more than $200 million when he left Home Depot. (By Daniel Acker -- Bloomberg News)

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By Tomoeh Murakami Tse
Washington Post Staff Writer
Thursday, February 15, 2007

Aflac said yesterday that it would become the first major U.S. company to give shareholders an advisory vote on executive compensation packages, bolstering investor groups that have vowed to push companies to change their governance practices at annual shareholder meetings this spring.

Aflac, the world's largest seller of supplemental health insurance, said it would allow shareholders a nonbinding vote on its corporate pay practices beginning in 2009 -- the first year that the company's proxy statement will contain the three years of compensation data required by the Securities and Exchange Commission's new disclosure rules. Aflac made its announcement after a proposal last year by one shareholder, Boston Common Asset Management.

"They're an early adopter," said Richard Ferlauto, director of investment policy at the American Federation of State, County and Municipal Employees, which supports the so-called say-on-pay resolutions. "We expect others will follow."

Such proposals are among the most controversial of the hundreds this year by major shareholders, who are emboldened by public furor over outsized executive compensation. Proponents say that even though the votes would be nonbinding, they would pressure companies to change compensation policy.

At least 50 companies will have votes on say-on-pay at shareholder meetings, up from seven last year, according to Institutional Shareholder Services, a proxy advisory firm in Rockville.

Other closely watched resolutions include a proposal to allow shareholders to run opposing board candidates and another to tie executive pay more directly to corporate performance. Many of the companies targeted are in the hot seat over executives' salaries or the practice of back-dating options.

Home Depot, still smarting from controversy surrounding the lucrative exit package given to its former chief executive, last week invited an activist shareholder to join its board, helping to avert a potentially nasty proxy fight. And dozens of prominent companies, including Lehman Brothers, Honeywell and Wells Fargo, have agreed to change how directors are elected.

ISS said that since 2003, when investors began pushing for election by a majority of shareholder votes, about 200 companies have adopted some form of majority voting.

"I think 2007 represents something of a tipping point," said Stephen M. Davis, a fellow at the Yale University's center for corporate governance. "Smart companies see the writing on the wall."

Still, some corporations remain unyielding. So far this year, companies have successfully sought the SEC's approval to keep at least 40 of the 630 corporate governance-related proposals submitted by shareholders from coming to votes, according to ISS. Dozens more are trying.

Companies say though they have worked with investor groups to ensure best corporate governance practices, some proposals focus on narrow agendas that are costly and distracting to board members.

"It goes counter to what should be the fundamental question: What are the systems of governance in place that assure companies can grow and create more jobs and create greater shareholder value?" said John J. Castellani, president of Business Roundtable, an association in the District of chief executives of major U.S. companies. "We would rather have shareholders focus on shareholder value."


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© 2007 The Washington Post Company

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