Several key themes can be distilled from filed say-on-pay and frequency proposals required by the Dodd-Frank Act.  Key differences also exist in issuer treatment of inclusion of a resolution on the frequency vote and how issuers explain how they will determine if a frequency vote passes.

Say-on-Pay

Many proposals address:

• What the board will consider based on the outcome of the vote
• Emphasis on the advisory nature of the vote:  it will not be binding on the board, overrule any decision made by the board or create or imply any additional fiduciary duty by the board
• Compensations programs are designed to tie to performance that creates long term value
• Compensation in relation to median or peer groups
• Link to long term stock performance
• Alignment to shareholder expectations both short and long-term
• Emphasis on recent positive operating results
• Reduced pay when operating results decrease
• Alignment of executive compensation with key business objectives
• Corporate governance controls over executive compensation
• Absence of tax gross-ups
• Limited compensation that is not tied to performance – absence of multi-year employment agreements, guaranteed incentive awards, “golden parachutes” or significant lump-sum compensation payments upon termination of employment
• What the advisory vote is not a vote on:  not a vote on the company’s general compensation policies, compensation of the company’s board, or the company’s compensation policies as they relate to risk management

Frequency Vote

Many proposals address:

• What the board will consider based on the outcome of the vote
• That shareholders are free to express their concerns on executive pay to the board in years where a say-on-pay vote is not held
• Annual votes might hinder long-term focus of compensation plans
• Annual votes may overburden investors
• Triennial votes afford the board the time to understand the results of the vote, discuss with shareholders and implement changes
• Noting option plans and the like have been regularly submitted for shareholder approval
• Triennial votes tie to multi-year performance cycles

Resolutions on Frequency Vote

Companies continue to vary on whether they include a formal resolution on the frequency vote, or just recommend a vote for one of the three alternatives. 

Determining Which Frequency Votes Passes

Generally, most state corporation laws provide that proposals, other than the election of directors, need to receive a majority of the votes cast to pass.  Many issuers seem to be departing from this legal standard, and state something to the effect that the frequency that receives the greatest number of votes cast will be the frequency selected by the shareholders.  Some recent disclosures in this regard are as follows:

• The choice among the four choices included in the resolution which receives the highest number of votes will be deemed the choice of the stockholders (Hormel).
• The option of one year, two years or three years that receives the highest number of votes cast by stockholders will be the frequency for the advisory vote on executive compensation that has been selected by stockholders (Wegner).
• With respect to the frequency of advisory votes on executive compensation proposed in item (3), we have determined to view the frequency vote that receives the greatest number of votes cast by the holders of our Common Stock entitled to vote at the meeting as the advisory vote of shareowners on this item (Rockwell Collins).
• All other matters require for approval the affirmative vote of a majority of those shares present in person, or represented by proxy, and entitled to vote at the Annual Meeting (Telular).
• The option of one year, two years or three years that receives the highest number of votes cast by shareholders will be the frequency for the advisory vote on executive compensation that has been selected by shareholders (Rock-Tenn).

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