ACTUALLY, this reputation risk will exist for all publicly traded companies with investment operations, but there may be different aspects to take into consideration for different industries.
As has been widely reported, the SEC yesterday finalized its rule titled “Shareholder Approval of Executive Compensation and Golden Parachute Compensation,” better known as Say On Pay. The entire 152-page rule release (PDF 710KB) has been posted but there’s a summary and fact sheet here. Law firm WilmerHale has posted one of the many summaries here.
But there’s one interesting twist for companies that file 13-F reports with the SEC regarding their investment portfolio. The Dodd-Frank Act required those 13-F filers — a classification that includes most insurance companies — to annually disclose how they voted on say-on-pay and golden parachute matters for holdings in the portfolio.
Although the final rule issued yesterday does not yet address this requirement, I encourage insurance companies to keep this in mind as proxies are received by their investment operation. I have seen one report that the SEC indicated in their open meeting yesterday that they would address this topic in the coming month.
Beware voting disconnect
This rule could expose companies to “reputation risk” if their investment team votes proxies for say-on-pay in a fashion out of line with the board and management’s stance on the company’s own corporate governance.
I suspect the most likely disconnect would occur if a company 1) recommends to its shareholders that say-on-pay voting occur every three years while 2) voting proxies for companies in its portfolio for say-on-pay votes that occur every year, regardless of the respective companies’ board recommendations .
It’s akin to “do as I say, not as I do.” It will be interesting to see how the SEC shapes these reporting rules.
- Heather J. Wietzel (Linkedin) is a 25-year IR veteran. She formed InsuranceIR in 2009 to offer industry-specific investor relations support to companies in the insurance industry. InsuranceIR lets companies benefit from her 10 years of experience in that industry. Heather seeks to help clients leverage the time they are investing in SEC compliance and other communications to enhance the investor outreach effort. InsuranceIR has a strategic alliance with full-service IR firm Dix & Eaton. Heather shares thinking on insurance-sector IR and related topics on her blog www.InsuranceIR.com with other updates on Twitter @InsuranceIR.