Executive Compensation: Which Companies Are Proactive with Say-On-Pay?

by Malak Kazan, CECP, CCP, CBP, GRP 4. February 2011 16:14

With the heightened sensitivity toward executive compensation pay levels, there have been recent announcements indicating that companies are adjusting pay decisions relative to their organization’s performance and overall economic conditions. Some announcements related to executive compensation show that companies are proactively adapting.

  • Bank of America kept the base salary of CEO Brian Moynihan flat at $950,000, but his pay package will include $9.05 million in restricted stock units.  No senior executives will receive cash bonuses.  Three other senior executives at the Charlotte, N.C.-based bank are getting salary increases of 6.25 percent, to $850,000 from $800,000, in addition to stock awards.
  • In January 2011, Citibank reported a $10.6 billion profit for 2010 and announced that the base salary of its CEO, Vikram Pandit, was adjusted to $1.75 million.  In 2008, Citibank received a $45 billion bailout from taxpayers and soon after, in February 2009, the CEO reduced his pay to $1.00 until the firm returned back to profitability.  Pandit declined a bonus for the 2010 performance year.

Also encouraging, some companies recently took say-on-pay requirements into consideration during their annual shareholders meetings:

  • Becton, Dickinson held its annual shareholder meeting on February 1, 2011, and its shareholders approved management's say-on-pay proposal regarding executive compensation and voted to hold say-on-pay votes annually.
  • At Monsanto's annual meeting on January 25, 2011, the agriculture company's investors voted for an annual advisory vote on executive compensation: 62.2% for annual, a 35.9% for triennial, 1.4% for biennial, and 0.5% abstentions.  The Board announced they would implement the annual advisory vote on executive compensation although it was non-binding.

With the advent of say-on-pay requirements, we will continue to see more collaboration between Boards of Directors and shareholders, as well as alignment of executive compensation decisions with shareholders and pay-for-performance relative to external market conditions.