The official results are still pending, but it looks like PG&E investors may get a little more control over take-home pay for the top dogs at the corporation. That’s right, Mr. Peter Darbee. Me and my 14 shares of PG&E stock are coming after you and your $7,821,073 in compensation.
PG&E investors voting by proxy passed a shareholder proposal that would allow some “say on pay” when it comes to compensation for named executive officers of the company. At the May 14 annual meeting it was announced that 52 percent of proxy voters approved of the resolution, enough of a majority for it to pass, although votes from the couple hundred attendees of the meeting had not yet been tallied. An official count will be released Monday.
UPDATE: May 19, 2008. We got the official word. From today's PG&E filing with the SEC: "PG&E Corporation shareholders approved a shareholder proposal requesting that the Board of Directors adopt a policy to provide the shareholders an opportunity to vote at each annual meeting on an advisory resolution to ratify the compensation paid to certain executive officers. The Board of Directors will consider the approved shareholder proposal."
This marks another victory for the growing shareholder activism movement. The proposal came from Ray T. Chevedden, who wrote in the proxy statement: “Investors are increasingly concerned about mushrooming executive pay which often appears to be insufficiently aligned with the creation of shareholder value. As a result, in 2007 shareholders filed more than 60 “say on pay” resolutions with companies, averaging a 42 percent vote.” He goes on to point out that seven of them actually passed, and an improvement on this level was overdue for PG&E. “Another reason for this proposal is the $14 million in pay in a year for Mr. Glynn, our Chairman during our years of bankruptcy. Our dividend was also suspended for years under Mr. Glynn’s watch.”
Chevedden did not attend the meeting to urge a yes vote, but Nick Rossi spoke on his behalf, telling PG&E’s CEO, Peter Darbee, that he wasn’t worth $8 million and drawing a comparison between his dividend and executive pay increases. “I’ve gone up six times. The CEO’s have gone up 40 times. That’s not right.”
The PG&E Board of Directors recommended a “no” vote on the proposal, which is not binding and only allows shareholders to vote on an advisory resolution drafted by management to ratify pay. In their proxy statement opposing the change, PG&E said the Board’s Compensation Committee handled the task fine, Congress was considering legislation to mandate “say on pay” so this was redundant or potentially conflicting, and that a rule like this may scare off possible job candidates.
The jury’s still out on whether or not “say on pay” is effective, but its popularity is indicates people are no longer comfortable with skyrocketing pay and huge severances. Even if proposals pass, corporations can still chose not to adopt them, and as the Washington Post reported on May 5, even when investors had a chance to dock pay, they still voted in favor of management’s proposal for Aflac’s top executives.
In the same article, the Post pointed to Ed Durkin, director of corporate affairs for the United Brotherhood of Carpenters and Joiners, whose group advances more specific plans for"pay for superior performance" proposals this year. This year they put up 34 such proposals and dropped 28 of them after companies cut deals to change instead.