October 15, 2021

Volume XI, Number 288

Advertisement
Advertisement

October 15, 2021

Subscribe to Latest Legal News and Analysis

October 14, 2021

Subscribe to Latest Legal News and Analysis

October 13, 2021

Subscribe to Latest Legal News and Analysis
Advertisement

Pay for the Chief: The Shareholders Speak Out

Among the many elements of the comprehensive reform applicable to public companies in the Dodd-Frank Consumer Fraud and Protection Act (“Dodd-Frank”), shareholders were given new and additional powers with respect to compensation paid to companies’ executives, the so-called “say-on-pay” rules.

The “say-on-pay” rules require companies to include a non-binding shareholder vote on the compensation for the named executive officers disclosed in the proxy statements at least every three years. Companies are also required to allow non-binding shareholder votes at least once every six years to determine the frequency of future“say-on-pay” votes. Until a few days ago, little was heard of shareholders refusing to approve executive pay packages. Indeed, last year, only 2% of shareholders refused to approve executives’ compensation packages.

On April 18, 55% of Citibank’s voting shareholders refused to approve the compensation plan for Citibank’s top five executives, including its Chief Executive Officer. Of chief concern to the shareholders was Citibank’s poor performance, not the amount of the pay. While non-binding, the shareholders’ vote sent a clear signal not just to Citibank but also to the market that compensation must be aligned with company performance. Even if the shareholders do not have the power to control the amount of pay to the executives, the potential for these public rebukes to change corporate culture concerning executive pay cannot be underestimated — for both public and private companies.

©1994-2021 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.National Law Review, Volume II, Number 116
Advertisement
Advertisement
Advertisement
Advertisement
Advertisement
Advertisement

About this Author

Andrew Bernstein, Executive Compensation Attorney, Mintz Law Firm
Member

Andrew is a seasoned employment attorney whose practice encompasses transactional matters and litigation. He advises clients on executive compensation issues in mergers and acquisitions, venture capital investments, and private equity financings. And he litigates disputes around executive compensation agreements, partnerships, trade secrets, and restrictive covenants in federal, state, and appellate courts and in arbitration venues. Companies, chief executive officers, and executives seek his counsel on compensation matters and issues related to leveraged buyouts by...

212-692-6742
Advertisement
Advertisement
Advertisement