Directorship Magazine Predicts the 2007 Proxy Season Will Be a “Perfect Storm"
2007 Shapes Up As Decisive Year for CEO compensation; directors to pull back the reins or risk being deposed by shareholder forces.
New York, NY, December 06, 2006 --(PR.com)-- A constellation of forces will greatly intensify the pressure on corporate boards and their chief executive officers in 2007 and the litmus test issue will be CEO compensation, Directorship magazine warns in its just released December-January issue. It’s even possible that boards will be replaced by angry shareholders if they mismanage the CEO pay issue.
“CEO compensation continues to be the one issue that unites the fractious tribes,” the magazine said in an editorial. “Labor and religious groups, the proxy advisory and governance groups, the credit rating agencies and major pension funds and hedge funds may have conflicting agendas, but they can unite on CEO comp.” Other new players are private-equity funds which are capable of putting together tens of billions of dollars to take publicly traded companies private.
Here are the primary forces at work, according to the magazine:
—Democratic victories in the House and Senate mean that politicians like Rep. Barney Frank, head of the House Banking Committee, are going to push for shareholder approval of CEO compensation.
—Companies are going to have to disclose a lump sum figure for how much a CEO gets paid in their proxies, as per new requirements from the Securities and Exchange Commission. This will have a “shock and awe” effect.
—Institutional Shareholder Services, the major proxy advisory firm, predicts a record number of shareholder resolutions seeking majority voting in support of directors. And more resolutions are going to seek an end to staggered boards. That means an entire board can be voted out at once.
—At a critical meeting on December 13, the SEC may give ground to the American Federation of State, County, and Municipal Employees (AFSCME), which wants the SEC to allow shareholders to nominate directors and to require companies to include those nominations in proxies.
—The New York Stock Exchange has moved forward with its plan to specify that broker-dealers holding shares in “Street name” will not be able to vote with management unless the actual owner of the shares, meaning investors, specifically direct them to do that. This will have an impact on voting percentages.
“If you add up all these forces, the reality may be that a board can now be voted out or dramatically transformed if it mismanages CEO pay,” says Editor in Chief William J. Holstein. “If companies allow coalitions of shareholder activists to form with major institutional investors and private equity funds, the result could be a huge wave of battles for control of companies.”
Adds Jeffrey M. Cunningham, Chairman and CEO of Directorship, “Corporate boards that are not prepared for the public nature of this ordeal may find themselves serving as guinea pigs in the vast test lab of corporate governance.”
About Directorship
Directorship is the leading monthly magazine for directors providing the most up to date insights into corporate governance and identifying the latest in committee best practices, regulatory changes, board and management relations, enterprise risk management, and compensation strategy—on a level that is appreciated and understood by directors.
Visit Directorship online at http://www.directorship.com/index.aspx
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“CEO compensation continues to be the one issue that unites the fractious tribes,” the magazine said in an editorial. “Labor and religious groups, the proxy advisory and governance groups, the credit rating agencies and major pension funds and hedge funds may have conflicting agendas, but they can unite on CEO comp.” Other new players are private-equity funds which are capable of putting together tens of billions of dollars to take publicly traded companies private.
Here are the primary forces at work, according to the magazine:
—Democratic victories in the House and Senate mean that politicians like Rep. Barney Frank, head of the House Banking Committee, are going to push for shareholder approval of CEO compensation.
—Companies are going to have to disclose a lump sum figure for how much a CEO gets paid in their proxies, as per new requirements from the Securities and Exchange Commission. This will have a “shock and awe” effect.
—Institutional Shareholder Services, the major proxy advisory firm, predicts a record number of shareholder resolutions seeking majority voting in support of directors. And more resolutions are going to seek an end to staggered boards. That means an entire board can be voted out at once.
—At a critical meeting on December 13, the SEC may give ground to the American Federation of State, County, and Municipal Employees (AFSCME), which wants the SEC to allow shareholders to nominate directors and to require companies to include those nominations in proxies.
—The New York Stock Exchange has moved forward with its plan to specify that broker-dealers holding shares in “Street name” will not be able to vote with management unless the actual owner of the shares, meaning investors, specifically direct them to do that. This will have an impact on voting percentages.
“If you add up all these forces, the reality may be that a board can now be voted out or dramatically transformed if it mismanages CEO pay,” says Editor in Chief William J. Holstein. “If companies allow coalitions of shareholder activists to form with major institutional investors and private equity funds, the result could be a huge wave of battles for control of companies.”
Adds Jeffrey M. Cunningham, Chairman and CEO of Directorship, “Corporate boards that are not prepared for the public nature of this ordeal may find themselves serving as guinea pigs in the vast test lab of corporate governance.”
About Directorship
Directorship is the leading monthly magazine for directors providing the most up to date insights into corporate governance and identifying the latest in committee best practices, regulatory changes, board and management relations, enterprise risk management, and compensation strategy—on a level that is appreciated and understood by directors.
Visit Directorship online at http://www.directorship.com/index.aspx
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Amanda White
617.399.3041
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Amanda White
617.399.3041
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