The filing of proxy statements with Dodd-Frank compliant say-on-pay proposals has become a daily event. Public companies continue to prefer a three year frequency vote. As pointed out on thecorporatecounsel.net, if you prefer a triennial frequency, you probably want that choice to be the first choice on the proxy card. Some examples from recently filed proxy statements are set forth below.
Xata Corp., set for below, recommends a two year frequency, joining Hormel, another Minnesota based public company, in this board recommendation. Xata also states the frequency option that achieves a plurality of votes cast “will be deemed to have received the advisory approval of our shareholders.”
In accordance with recent legislation, the Company is providing shareholders with an advisory (non-binding) vote on compensation programs for our Named Executive Officers (sometimes referred to as “say on pay”). Accordingly, you may vote on the following resolution at the 2011 annual meeting:
“Resolved, that the shareholders approve, on an advisory basis, the compensation of the Company’s Named Executive Officers as disclosed in the Compensation Discussion and Analysis, the accompanying compensation tables, and the related narrative disclosure in this Proxy Statement.”
This vote is nonbinding. The Board and the Compensation Committee, which is comprised of independent directors, expect to take into account the outcome of the vote when considering future executive compensation decisions to the extent they can determine the cause or causes of any significant negative voting results.
As described in detail under “Compensation Discussion and Analysis” our compensation programs are designed to motivate our executives to create a successful company. If fully earned based on the achievement of performance targets, equity compensation in the form of restricted stock units that are subject to further time-based vesting is the largest component of executive compensation. We believe that our compensation program, with its balance of short-term incentives (including cash bonus awards and performance conditions for awards of restricted stock units) and long-term incentives (including equity awards that vest over up to five years) and share ownership guidelines reward sustained performance that is aligned with long-term shareholder interests. Shareholders are encouraged to read the Compensation Discussion and Analysis, the accompanying compensation tables, and the related narrative disclosure.
The Board of Directors unanimously recommends that you vote FOR the approval, on an advisory basis, of the compensation of our Named Executive Officers as disclosed in the Compensation Discussion and Analysis, the accompanying compensation tables, and the related narrative disclosure.
In addition to providing shareholders with the opportunity to cast an advisory vote on executive compensation, the Company this year is providing shareholders with an advisory vote on whether the advisory vote on executive compensation should be held every one, two or three years.
The Board believes that a frequency of “every three years” for the advisory vote on executive compensation is the optimal interval for conducting and responding to a “say on pay” vote. Shareholders who have concerns about executive compensation during the interval between “say on pay” votes are welcome to bring their specific concerns to the attention of the Board. Please refer to “Shareholder Communications to the Board” in this Proxy Statement for information about communicating with the Board.
The proxy card provides shareholders with the opportunity to choose among four options (holding the vote every one, two or three years, or abstaining) and, therefore, shareholders will not be voting to approve or disapprove the Board’s recommendation.
Although this advisory vote on the frequency of the “say on pay” vote is nonbinding, the Board and the Compensation Committee will take into account the outcome of the vote when considering the frequency of future advisory votes on executive compensation.
The Board of Directors unanimously recommends that you vote for the option of “every three years” for future advisory votes on executive compensation.
IN THE ABSENCE OF SPECIFIC INSTRUCTIONS, PROXIES WILL BE VOTED “FOR” PROPOSALS 1, 2 AND 3, “FOR” A THREE YEAR FREQUENCY, AND IN THE DISCRETION OF THE PROXY HOLDERS AS TO ANY OTHER MATTER THAT MAY PROPERLY COME BEFORE THE ANNUAL MEETING OF SHAREHOLDERS.
As required by Section 14A of the Securities Exchange Act, shareholders may vote to approve or not approve the resolution below on the compensation of the Executive Officers as disclosed in the Compensation Discussion and Analysis and accompanying Executive Compensation Tables and narrative on pages 28-61:
RESOLVED, that the shareholders approve the Executive Officer compensation as discussed and disclosed in the Compensation Discussion and Analysis and the Executive Compensation Tables.
The Board recommends a vote for this resolution. Our Executive Officer compensation program is designed to reward performance that creates long-term shareholder value for you through the following features which are discussed on pages 29-31:
- Constant performance goals, not tied to current operating or economic conditions, that require the management team to maintain and improve profitability in all economic environments to receive target compensation;
- A compensation mix weighted toward long-term incentives to reward sustainable growth and profitability;
- Substantial linkage of Executive Officer compensation to long-term stock performance; and
- Median pay positioning for average performance, above median pay for above average performance, and below median pay for below median performance.
The Company has a record of providing an Executive Officer compensation program that is strongly aligned with its performance, illustrated by the charts on pages 31 and 32.
Although the vote is non-binding, the Board and the Management Development and Compensation Committee will review the voting results. If there are a significant number of negative votes, we will seek to understand the concerns that influenced the vote, and address them in making future decisions about executive compensation programs.
The Board recommends a vote “FOR” this resolution. As described in the Compensation Discussion and Analysis, our Executive Officer compensation program has been thoughtfully designed to support our long-term business strategies and drive creation of shareholder value. It is aligned with the competitive market for talent, very sensitive to Company performance and oriented to long-term incentives to maintain and improve the Company’s long-term profitability. We believe the program delivers reasonable pay which is strongly linked to Company performance over time relative to peer companies.
As required by Section 14A of the Securities Exchange Act, shareholders may vote on the resolution below regarding how often the Company will conduct a shareholder advisory vote on Executive Officer compensation. You may vote on whether you prefer an advisory vote every one, two, or three years, or to abstain.
RESOLVED, that the shareholders be provided an opportunity for an advisory vote on the compensation of Executive Officers as required by Section 14A of the Securities Exchange Act at the interval selected.
The Board recommends a vote every three years. As described in the Compensation Discussion and Analysis, the Company’s Executive Officer compensation is designed with a long-term focus. Key elements of the program include performance measures that require creation of shareholder value across economic cycles, long-term orientation of the pay mix to reward the disciplined long-term investments that are fundamental to our business model, and substantial linkage to long-term stock performance. The Board intends that the program be responsive to shareholder concerns, but is concerned that annual votes on the program could foster a short-term focus and undermine some of its most thoughtful features.
The Board is also concerned that annual advisory votes on executive compensation for all public companies will overburden investors and require them to evaluate too many executive compensation programs annually, hindering careful evaluation of the programs. Because of this, annual votes may lead to “one size fits all” formulas for evaluating compensation that will impair the Company’s ability to design its compensation program to align with its business model and performance drivers.
Finally, the Board believes that the Company will be better served by periodic votes on compensation that afford the Committee time to understand concerns and deliberate appropriate responses, and allow shareholders time to see responsive changes. In the event an advisory vote indicates shareholder concern, the Board believes shareholders will be best served if the Board takes the time to understand the issues and thoughtfully develop responsive alternatives.
The Board recommends a vote “FOR” three-year intervals to support the long-term focus of the executive compensation program and allow for thoughtful implementation of changes when needed.
This proxy will be voted as directed, but if no instructions are given for voting on the matters listed on the reverse side, this proxy will be voted as recommended by the Board of Directors.
The Company seeks a non-binding advisory vote from its shareholders to approve the compensation of our executive officers as described under “EXECUTIVE COMPENSATION” and the tabular disclosure regarding named executive officer compensation (together with the accompanying narrative disclosure) in this proxy statement.
This proposal gives our shareholders the opportunity to express their views on the Company’s executive officer compensation. Because your vote is advisory, it will not be binding upon the Board of Directors. However, the Compensation Committee will take into account the outcome of the vote when making future executive officer compensation decisions.
As we discuss below in our Compensation Discussion and Analysis, we believe that our compensation policies and decisions are designed to assist the Compensation Committee meeting its objectives. The objectives of the Company’s executive compensation program are to:
- attract and retain top quality executive talent;
- establish and support a performance-driven culture and motivate executives to deliver strong business results; and
- ensure that executives are aligned with shareholder expectations by closely linking total compensation with short-term business objectives and creation of long-term shareholder value.
Accordingly, we are presenting this proposal, which gives you, our shareholder, the opportunity to approve our executive officer compensation as disclosed in this proxy statement by voting for or against the following resolution:
RESOLVED, that the shareholders approve the compensation of the Company’s executive officers, as disclosed in the Compensation Discussion and Analysis, the compensation tables, and the related disclosure contained in the Company’s Proxy Statement for its 2011 Annual Meeting.
OUR BOARD OF DIRECTORS BELIEVES THAT THE COMPENSATION OF OUR EXECUTIVE OFFICERS IS APPROPRIATE AND RECOMMENDS AN ADVISORY VOTE “FOR” THIS PROPOSAL.
The Company seeks a non-binding advisory vote from its shareholders regarding the desired frequency for holding a non-binding advisory vote to approve the compensation of our executive officers as described in our annual proxy statements.
This proposal gives our shareholders the opportunity to express their views as to whether the non-binding advisory vote on our executive officer compensation practices should occur every one, two, or three years. Because your vote is advisory, it will not be binding upon the Board of Directors. However, the Board of Directors will take into account the outcome of the vote when deciding the frequency of the non-binding advisory vote on our future executive officer compensation decisions.
We recommend that a non-binding advisory vote to approve the compensation of our executive officers as disclosed in our annual proxy statements occur once every two years. We believe holding that vote every two years provides the most effective timeframe because it allows our Board of Directors and Compensation Committee sufficient time to engage our shareholders following each such vote in order to understand any concerns they may have, and to respond with any changes to the compensation of our executive officers and/or related disclosure deemed appropriate in response to the results of a shareholder advisory vote. In addition, our compensation program objectives include establishing and supporting a performance-driven culture and motivating executives to deliver strong business results. Accordingly, we believe that a vote every two years would provide our shareholders with additional time to evaluate the effectiveness of our executive compensation philosophy as it relates to our performance. In the future we may determine that a more or less frequent advisory vote is appropriate, either in response to the vote of our shareholders on this Proposal 3 or for other reasons.
While we believe our recommendation is appropriate at this time, the shareholders are not voting to approve or disapprove our recommendation, but are instead asked to provide an advisory vote on whether the non-binding advisory vote on the approval of our executive officer compensation practices should be held every one, two or three years. The option among those choices that obtains a plurality of votes cast by the shares present or represented by proxy and entitled to vote at the Annual Meeting will be deemed to have received the advisory approval of our shareholders.
OUR BOARD OF DIRECTORS RECOMMENDS AN ADVISORY VOTE FOR “2 YEARS” FOR THIS PROPOSAL.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED “FOR” ALL NOMINEES LISTED IN PROPOSAL 1, “FOR” PROPOSAL 2, “2 YEARS” FOR PROPOSAL 3, AND IN THE DISCRETION OF THE PROXY HOLDER ON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
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