PIRC : independent research and advisory consultancy

PIRC is the UKs' leading independent research and advisory consultancy providing services to institutional investors on corporate governance and corporate social responsibility. Since 1986, it has been the pioneer and champion of good corporate governance within the UK.
Authoritative resource
PIRC has a wide spectrum of clients ranging from pension funds, faith-based investors, trade unions to banks and asset managers. Its Corporate Governance Service is an authoritative and vital resource for active investors, whilst its widely-read Shareholder Voting Guidelines provide a market-wide benchmark for investors and forms part of the movement for corporate governance reform and long-term wealth creation strategies for responsible investors.

For more information about PIRC or to arrange a meeting, contact Janice Hayward, or call us on 0207 247 2323.

Aflac passes first pay vote test

Aflac has seen its executive compensation policy win widespread shareholder approval, becoming the first US company to allow a socalled ‘say on pay’. According to reports, 93% of votes were cast in favour of Alfac’s policy, with about 2.5% against. PIRC had recommended that shareholders oppose the policy.

An increasing number of US companies are expected to put compensation policies to the vote, and shareholders are continuing to push for more widespread adoption of such advisory votes. Verizon, Par Pharmaceuticals and Blockbuster have all reportedly committed to introducing a say on pay. Meanwhile the number of shareholder resolutions filed this season seeking the introduction of advisory votes is already up on last year. Such resolutions have achieved widespread backing from shareholders. They received an average vote of just under 38% in favour during 2007, according to detailed analysis carried out by FundVotes.com.

However the move towards shareholder advisory votes is not without its critics, some hailing from unlikely quarters. The Washington Post quotes Ed Durkin, director of corporate affairs for the United Brotherhood of Carpenters and Joiners, as having concerns that given e say on pay shareholders will generally vote to accept companies’ pay policies providing they are not out of line with those at similar firms.10 This could further entrench executive rewards. The point has also been made that supportive votes may make executives unwilling to change any aspect of their pay policy.

These views have some resonance in the UK market. Although the introduction of mandatory advisory votes has strengthened shareholder engagement over pay, and arguably has encouraged greater linkage with performance, it has nothing to halt the onward march of ever greater pay differentials. In addition the point could be made that favourable pay votes act to legitimize high executive rewards.

So whilst PIRC supports the introduction of a say on pay in the US, we would caution that it may not solve all the problems in compensation that its proponents have identified.

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