Some people seem to think that if companies do anything even close to listening to shareholders on issues like compensation, the capitalist world as we know it might come completely unhinged. (Ironic, since shareholders do represent "capital.") However, AFLAC (NYSE: AFL ) is not only among the first to give its shareholders say regarding its top executives' pay, it has now gone ahead and actually held the first such vote. Guess what? Nothing came unhinged at all, as far as I can tell.
In fact, 93% of AFLAC's shareholders voted in favor of the compensation package. It sounds like AFLAC's shareholders are pretty happy. (And of the ones who didn't vote, well, I guess they can't really complain.)
So far, the collection of companies with plans to give their shareholders a "say on pay" in the form of a nonbinding vote over the next couple of years is pitifully sparse. Blockbuster (NYSE: BBI ) , Verizon (NYSE: VZ ) , and RiskMetrics Group (NYSE: RMG ) are among the pioneers. (It would be awfully ironic if RiskMetrics wasn't, since this recent IPO specializes in risk management and corporate governance consulting services.) Other companies like Apple (Nasdaq: AAPL ) and Motorola are looking into this initiative.
What does the current reluctance to give shareholders avenues for feedback say about our system? Personally, I think it says that, all too often, corporate management likes shareholders' capital but considers shareholders themselves powerless and inconsequential (or maybe even suckers).
Of course, here's another perfectly good theory as to why many companies balk: If shareholders overwhelmingly vote that top brass is not properly paid according to performance, well, gosh, maybe they're right. Why else would so many companies avoid such a simple, practical proposal? Recent scandals -- and big paychecks and payouts -- related to companies like Merrill Lynch (NYSE: MER ) and Citigroup (NYSE: C ) underline why many people are unhappy with many managements' takings (and leavings).
A quick glance at AFLAC's chart and its press release discussing long-term returns gives me a hunch that its shareholders are probably pretty happy with how management's doing, and by extension, the pay. Hey, what a concept. Perhaps most shareholders are reasonable, when they're treated with respect and can tell that management is looking out for the company's and shareholders' interests, and not just their own. Go figure.
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