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Harvey Pitt and Proxy Monitor 2011; say on pay

Jim Copland speaks with Harvey Pitt, former chairman of the Securities and Exchange Commission, about shareholder proposal trends over the last four years and how the SEC has changed since Dodd-Frank.

Relatedly, the Manhattan Institute releases its Fall 2011 Proxy Monitor report. Among its findings: shareholder proposals are sponsored by a small subset of shareholders; labor unions' shareholder activism appears potentially linked to union organizing campaigns and motivated by concerns other than shareholder return. "On balance, the empirical evidence analyzed in this report tends to throw into question the push for 'shareholder democracy' and suggests that shareholder activism in the form of shareholder proposals submitted on the proxy ballots of publicly traded companies may be more a vehicle for interest-group capture of corporations rather than for mitigating agency costs and improving shareholder returns."

Meanwhile, "say on pay" is already having an adverse effect on one corporation: Cincinnati Bell was one of the very tiny minority of companies whose "say on pay" shareholder vote rejected the executive compensation package. Since such votes are only supposed to be advisory without creating a fiduciary duty, and the independent board members believed the compensation package sound, the package was approved anyway. And now they're the subject of a federal complaint in the Southern District of Ohio that will almost certainly cost shareholders more than the executive compensation package itself. [NECA-IBEW Pension Fund v. Cox via Frankel]

This is one of a surge of lawsuits prompted by say-on-pay votes, as Reuters reported in May and Professor Bainbridge had predicted, despite the fact that Congress rejected a proposed cause of action. See also: Bainbridge, earlier on POL.

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Rafael Mangual
Project Manager,
Legal Policy

Manhattan Institute


Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.