Around 6,200 publicly traded companies will have to put all equity compensation plans --including stock option plans -- to a shareholder vote under new rules passed yesterday by the Securities and Exchange Commission. The rules apply to material changes to existing plans, such as repricing of stock options.
The New York Stock Exchange (NYSE) and the Nasdaq proposed the rules, which are requirements for listing. The NYSE had a pilot program that exempted broad-based equity compensation plans from the shareholder approval requirement, but the new rules boot the exemption.
The rules come on the heels of heated battles between shareholders and managers at such companies as Hewlett-Packard
Will this benefit investors? Probably, but we can't sit on our hands.
Everyone wants to pay managers properly and to align their interests with shareholders, but it has been hard to find the information. Huge institutional stockholders such as CalPERS, the $130 billion California Public Employees' Retirement System, are exercising more of their shareholder muscle and publicizing more pay details that are sometimes buried in company filings -- and sometimes not even buried anywhere.
Individual investors can get help from CalPERS' 2003 Shareowner Action handy focus list. The list shows that CalPERS wants JDS Uniphase
(Please note: An earlier version of this article relied on a Bloomberg report that said that CalPERS cited JDS Uniphase and TiVo
If the new rules not only subject these compensation plans to a vote but also make the information more easily available, informed investors can decide whether to join the fight or vote with their feet. That will be the best way to hasten the end of what John Wasik calls today's corporate twist to Harry Truman's "The buck stops here": The bucks never stop.