Colleges and Universities Should Join Major Institutional Investors in Voting for Annual Say on Pay

The Dodd-Frank financial reform bill requires a mandatory vote on whether advisory say on pay votes, which allow shareholders to approve or disapprove of executive compensation decisions, should occur every one, two or three years. Major institutional investors representing over $800 million in assets are calling for voters to vote for an annual referendum.

Colleges and universities, which promote open and informed dialogue in society, should vote alongside these investors in favor of an annual vote. Multi-stakeholder committees on investor responsibility often vote only environmental and social resolutions but say on pay is a matter that has social and governance implications, and one institutions of higher education should take seriously, and refer to their committees.

According to the release from AFSCME and Walden Asset Management, supporters of the annual votes include CalPERS, the New York State Common Retirement Fund, NYCERS, F&C Asset Management (U.K.), Hermes (U.K.), the General Board of Pension and Health Benefits of the United Methodist Church, Calvert Asset Management, Pax World and Amalgamated Bank. Mutual fund companies State Street, Vanguard, Fidelity and Putnam all have announced they will support these votes as well.

According to the release and statement:

“Unchecked and unapproved CEO pay directly contributed to the financial crisis,” said Gerald W. McEntee, President of AFSCME, which was the first sponsor of a shareholder resolution promoting an advisory vote on pay. “Companies with problematic pay practices or a history of ignoring shareholders will be seeking fewer votes. That’s why shareowners need to vote for annual say on executive pay.”

Timothy Smith, Senior Vice President of Walden Asset Management stated, “This will be a unique proxy season on executive compensation. Addressing excesses and problems with executive compensation requires a vote each and every year rather than occasional accountability every three years. Say on Pay votes have already stimulated re-thinking by Board Compensation Committees on various perks and controversial pay formulas. The discipline of an annual vote will encourage Boards to be more responsive and accountable on compensation.”

Read the full statement.

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