Local Executive Pay Proposals Fall Short Despite Growing Support

Proposals to give shareholders a vote on executive compensation failed at two Washington area companies yesterday, although the results encouraged activist investors who are pushing the changes at dozens of other companies.

At Lockheed Martin, nearly 40 percent of votes were cast in favor of the measure, the company said. About 53 percent voted against the proposal, and 7 percent abstained.

At Capital One Financial, the resolution was supported by 37 percent of the voters, 60 percent were against it, and 3 percent abstained, company spokeswoman Julie Rakes said in an e-mail.

"I think the vote is very good for a first-time [resolution] at Capital One," said Dick Ullrich, a representative of the Marianist Province of the United States, which sponsored the proposal. "Thirty-seven percent represents a very good beginning."

Ullrich said he was encouraged by the response he received yesterday from management, which agreed to meet with the Marianist Province, a Catholic order.

John G. Finneran Jr., Capital One's general counsel and corporate secretary, said designing compensation packages "is quite complex" and is one of the board's principal jobs. The board would have difficulty determining how to act on a simple up-or-down vote, he said. Critics of the measure also say the board must be able to offer enough pay to attract and retain talented executives.

"We're pleased that a majority of shareholders voted against this proposal," said Jeff Adams, a Lockheed spokesman. The company will continue to assess suggestions from shareholders, he said.

Activist shareholders began the spring proxy season hoping that their voices might finally be heard on executive pay. Their concerns have been given more weight, winning in some instances greater vote percentages than ever before. But according to the results available so far, the increased attention has not translated into a majority calling for an advisory vote on executive compensation packages.

"There's still not complete unanimity on the issue," said Pat McGurn, executive vice president of Institutional Shareholder Services, an independent proxy research firm in Rockville. He said not all large institutional investors who generally support corporate governance proposals are voting for the issue, because they think withholding votes against directors on executive compensation committees is a better way to address excessive pay.

"It's inching closer and closer to 50 percent, and it's really only a question of which meeting it's going to happen at," McGurn said, adding that shareholder resolutions tend to pick up momentum as the season goes on.

Proposals for a vote on pay -- known as "say on pay" by activist investors -- first appeared on shareholder ballots last year. Seven such measures received average support of 40 percent, according to ISS.

So far this year, shareholders have cast ballots on 13 of roughly 40 proposals expected to come up for a vote. Earlier this month, nearly 47 percent of Bank of New York shareholders supported the measure, and 49 percent of votes cast at Merck this week were in support.