Executive Compensation - Say on Pay

2010 – State Street Corporation

 

 

RESOLVED, that shareholders of State Street Corporation request  the board of directors to adopt a policy that provides shareholders the opportunity at each annual shareholder meeting to vote on an advisory resolution, proposed by management, to ratify the compensation of the named executive officers (“NEOs”) set forth in the proxy statement’s Summary Compensation Table (the “SCT”) and the accompanying narrative disclosure of material factors provided to understand the SCT (but not the Compensation Discussion and Analysis).  The proposal submitted to shareholders should make clear that the vote is non-binding and would not affect any compensation paid or awarded to any NEO.

     

Supporting Statement: Investors are increasingly concerned about mushrooming executive compensation especially when it is insufficiently linked to performance 

     

In 2009 shareholders filed close to 100 “Say on Pay” resolutions.  Votes on these resolutions averaged approximately 46% in favor, and over 25 companies had votes over 50%, demonstrating strong shareholder support for this reform.  Investor, public and legislative concerns about executive compensation have reached new levels of intensity.

     

An Advisory Vote establishes an annual referendum process for shareholders about senior executive compensation. We believe this vote would provide our board and management useful information from shareholders on the company’s senior executive compensation especially when tied to an innovative investor communication program.

      

In 2008 Aflac submitted an Advisory Vote resulting in a 93% vote in favor, indicating strong investor support for good disclosure and a reasonable compensation package.  Chairman and CEO Daniel Amos said, "An advisory vote on our compensation report is a helpful avenue for our shareholders to provide feedback on our pay-for-performance compensation philosophy and pay package."

     

Over 30 companies have agreed to an Advisory Vote, including Apple, Ingersoll Rand, Microsoft, Occidental Petroleum, Pfizer, Prudential, Hewlett-Packard, Intel, Verizon, MBIA and PG&E.  And nearly 300 TARP participants implemented the Advisory Vote in 2009, providing an opportunity to see it in action.

     

Influential proxy voting service RiskMetrics Group, recommends votes in favor, noting: “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.”

     

A bill mandating annual advisory votes passed the House of Representatives, and similar legislation is expected to pass in the Senate.  However, we believe companies should demonstrate leadership and proactively adopt this reform before the law requires it.

     

We believe existing SEC rules and stock exchange listing standards don’t provide shareholders with sufficient mechanisms for providing input to boards on senior executive compensation. In contrast, in the United Kingdom, public companies allow shareholders to cast a non-binding vote on the “directors’ remuneration report.”

     

Last year State Street was required to hold an advisory vote as a TARP recipient, but did not make it a continuing policy.

 

We believe that companies that have clearly explained compensation philosophy and metrics, reasonably links pay to performance, and communicates effectively to investors would find a management sponsored Advisory Vote a helpful tool.