Obama Plan to Put Pressure on Boards

Proposals For Say-On-Pay, SEC Authority Target Increasing Shareholder Influence
June 12, 2009, Pensions & Investments

President Obama's proposed rules on executive pay seek legislation requiring an annual say-on-pay vote for all publicly held corporations.

"With respect to say on pay, what the government is relying on is pressure by shareholders and potential embarrassment to companies to the extent they don't take into consideration shareholder views," said Kenneth A. Raskin, New York-based partner and the head of the global executive compensation, benefits and employment law practice group of the law firm of White & Case LLP.

"At the end, the vote is still non-binding. But companies will take these things seriously because what is binding is the shareholder vote" to replace members of the board who ignore shareholder discontent, Raskin said.

Say on pay, coupled with the administration's guidelines for executive compensation standards, "focuses on rewarding performance on a long-term basis without taking excessive risk," Raskin said.