Another shareholder meeting voted to give shareholders a say (advisory) on executive compensation. Verizon is the latest of about 20 US quoted companies that has seen their shareholders demand a vote on executive pay. Now called "Say on Pay Proposals", these initiatives are gaining ground,and the House of Representatives has already passed a bill in this direction. Great Britain, Australia and Norway (only for companies where the government owns a big stake) already have this type of legislation in place. Other countries are talking about it.
I don't believe shareholders actually want to take the setting of executive compensation away from the board of directors. But they want more explanations. Usually, while setting the pay of the top executives, the compensation committee of the board asks for a benchmark of the compensation of the other companies in the same market segment or/and of the same size. These benchmark studies are provided by executive search companies who have every interest in the compensation rising, as they are paid a percentatge of the salary of the new hires. Most people thought that added transparency would rein in the pay rises. What it does sometimes is created a demand from executives that they be aligned with the top of the market. And so a rising tide raises all boats. The idea of Say on Pay Proposals, is that if the shareholders believe the pay packages are excessive, they can show they displeasure in a vote - which gives a strong signal to the compensation committee. And when really unhappy, they chose to vote against the reelection of the directors on this committee (as in the case of Novartis this year).
I don't know where all this is going to end, but there are 24h in a day and although people are not interchangeable, they are also not irreplacable. I think some self-restraint on the part of the CEOs might be a welcome trend. New editorial in the New York Times here.