For all the complaining that investors and Foolish analysts do about executive pay, it might come as a surprise that investors rejected two out of the three "say on pay" proposals at pharmaceutical companies' annual meetings this week. Shareholders at both Johnson & Johnson (NYSE: JNJ ) and Abbott Labs (NYSE: ABT ) rejected the idea, and Pfizer's (NYSE: PFE ) investors just barely passed the resolution, with a bit more than 52% in favor.
My guess is that investors figured the proposals, which only give shareholders an advisory role, didn't have enough teeth to make them worth the effort. Maybe, having just experienced Earth Day, investors figured they'd save the paper.
There are probably better ways to get investors' opinions on shareholder pay than a yes/no vote at companies' annual meetings anyway. Amgen created an online survey to get investors' opinions on executive pay, and Prudential Financial (NYSE: PRU ) has also asked for online comments about pay. Other companies, such as Home Depot (NYSE: HD ) , have met with shareholders individually or in groups to discuss the issue.
Of course, investors have always had a voice: their sell button. Don't like the pay that the board is bestowing on Starbucks' (Nasdaq: SBUX ) Howard Schultz or Citigroup’s (NYSE: C ) Vikram Pandit? Just sell and move on. Or, perhaps, vote out the board members. Remember, shareholders own the company, and the board is supposed to act on their behalf.
"Say on pay" sounds good -- and catchy besides -- which is probably why lawmakers tout it, but the reality of the situation is that an advisory role isn't worth very much. It would certainly be a good start for investors to be able to trust management to increase shareholder value, and the board to pay executives the appropriate amount. If that's not occurring, however, it's probably better for most investors to move on, rather than try and change things from the inside. We can't all be Carl Icahn.
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