Investors take credit in Say on Pay reform

Investor action through letters and company dialogue has resulted in more than 40 companies in the US, including Goldman Sachs, State Street, BNY Mellon and Conoco, agreeing to implement Say on Pay reform, according to Timothy Smith, senior vice president, Walden Asset Management who recently coordinated a letter signed by investors including CalPERS chief investment officer Joe Dear, urging 17 financial institutions, including Bank of America, to adopt reform.

“We believe it is critically important for investors to engage companies on say on pay via letters, dialogue and shareholder resolutions. The average vote on these resolutions in this last year’s proxy season was close to 46 per cent, with more than 25 votes over 50 per cent, which sent a very strong message to management,” he said.

CalPERS was among 30 investors that signed the open letter to 17 financial institutions asking them to follow other financial services industry companies to enact the shareholder advisory vote on executive compensation, or Say on Pay.

“We applaud Goldman Sachs, State Street and Bank of New York Mellon for leading the way to enact this important corporate governance reform,” Joe Dear said in a statement. “While CalPERS doesn’t see a shareowner advisory vote as a panacea, companies that adopt the policy will significantly advance sound governance goals of improved accountability to investors and the creation of long-term share value.”

Smith said investors were at the forefront of the reform movement, and while there was still hope that legislation would provide guidance for all companies, it is unclear where the Senate vote is headed.

The letter went to 17 companies including Bank of America, JP Morgan Chase, Northern Trust, Morgan Stanley, Citigroup, Wells Fargo, US Bancorp, Waddell & Reed, BB&T, Capital One Financial, American Express, PNC Financial Services, SunTrust, Fifth Third, Comerica, KeyCorp and Regions Financial.

Other signatories include representatives of the California State Teachers’ Retirement System; United Methodist Church General Board of Pension and Health Benefits; Firefighters’ Pension Systems of Kansas City, Mo.; TIAA-CREF; and the Council of Institutional Investors.