A Cumulous Cloud Of Confusion Reigns Over Vote Required For Say-On-Pay Frequency

In reviewing recent proxy statement filings with the Securites and Exchange Commission, I’ve noted a great deal of confusion regarding the vote required for approval of the newly mandated advisory resolution on the frequency of shareholder votes on executive compensation. Section 951 of the Dodd-Frank Act requires issuers to include in their proxy statements a resolution to determine whether the shareholder advisory vote on executive compensation will occur “every 1, 2, or 3 years”. The SEC in its new Rule 14a-4(b)(3) has added the requirement that the proxy card allow a stockholder the option of marking “abstain”.

Because the proxy must offer a choice among several alternatives, some companies are stating in their proxy statements that the option that achieves a plurality vote will be determined to be the decision of the shareholders. For example, one company’s proxy statement states...

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