Executive Compensation - Say on Pay

2010 – Merck & Co., Inc.

 

 

RESOLVED: The stockholders of the new Merck & Co., Inc. (the “Company”) recommend that the Board of Directors (“Board”) adopt a policy requiring that the proxy statement include a proposal, submitted and supported by Management, seeking an advisory vote of shareholders to ratify and approve the report of the Committee on Compensation and Executive Development, and the executive compensation policies and practices described in the Compensation Discussion and Analysis.

     

Supporting Statement: Investors are increasingly concerned about runaway executive compensation and its disconnect with performance.  In 2009, stockholders filed nearly 100 “Say on Pay” resolutions.  The proposals received, on average, 46% of the votes and passed at more than 20 companies—demonstrating strong shareholder support for this reform. 

 

A 2009 report by an executive compensation task force of the Conference Board recommends that companies restore investors’ trust in the ability of boards to oversee executive compensation plans by ensuring that the programs are “transparent, understandable and effectively communicated to shareholders.” 

 

“If shareholders need a vote on one issue, it is executive remuneration,” states a September 2009 report on Lessons from Say on Pay in the UK by Railpen Investments and PIRC Limited.  Public companies in the United Kingdom have let shareholders cast a vote on the “directors’ remuneration report,” which discloses executive compensation, since 2002.  Such a vote is not binding but gives shareholders a clear voice that could help shape executive compensation. 

 

”Say on pay promotes dialogue between investors and boards and encourages investors to engage with boards on a readily understandable issue, where interests may conflict,” Sir Adrian Cadbury, author of the 1992 Cadbury Report on UK Corporate Governance, observed.  “It is also a litmus test of how far boards are in touch with the expectations of their investors.”

 

An advisory vote establishes an annual referendum process for shareholders on executive compensation of the Named Executive Officers (“NEOs”).  We believe this vote would give our Company useful information about investors’ views on NEO compensation.  More than 25 companies, including Apple, Hewlett-Packard, Intel, Occidental Petroleum, Verizon and Microsoft, have already agreed to such a vote.

 

RiskMetrics Group, the influential proxy voting service, backs these proposals.  “RiskMetrics encourages companies to allow shareholders to express their opinions of executive compensation practices by establishing an annual referendum process.  An advisory vote on executive compensation is another step forward in enhancing board accountability.”

     

Congress is expected to soon pass legislation requiring an annual advisory vote on pay.  However, we believe companies should demonstrate leadership and proactively adopt this practice.

     

We urge you to vote FOR this proposal.