The "say on pay" movement isn't
saying as much as some people had hoped. So far this year, most
proposals to let shareholders make nonbinding "approve" or "disapprove"
votes on executive compensation are failing, and some are getting even
less support than they did last year.

So much for bombing CEO pay back to the 1970s. But it's too early to give up.

Support
for say on pay is still pretty strong. The movement is only three years
old. The swing voters, mutual funds such as those run by Baltimore's T. Rowe Price and Legg Mason, seem to be warming to it. And political momentum for requiring say on pay by law is still high.

CEO
pay is set by corporate directors, who tend to belong to mutual
back-scratching societies that spread the dough around as long as
everybody acts nice. The idea behind say on pay is to let shareholders
publicly opine on compensation, which has remained stratospheric even
as corporate profits have slumped.

Companies that have formally adopted say-on-pay
policies include Aflac, Verizon, Blockbuster and Par Pharmaceutical. So
far this year, a majority of shareholders at six companies, including Alaska Air Group and electric utility PG&E, have voted in favor of them, according to RiskMetrics.

But proponents of say on pay have lost at more than 30 other companies this year.

Shareholders for Bethesda-based Lockheed Martin, Maryland's biggest company, rejected a say-on-pay proposal in April.


Those at other big Maryland employers - Black & Decker,
Constellation Energy - apparently haven't mustered enough energy to
even get one on the ballot. (Black & Decker included a union
proposal to limit executive pensions, which was defeated.)


Average support for say on pay was 43 percent at all meetings where it
was considered - the same as last year, said RiskMetrics.

But support fell from last year's levels among owners of big financial firms such as Citigroup, Wachovia and Merrill Lynch.


(Maybe shareholders didn't want to distract those companies as they try
to emerge from subprime mortgage pits. But considering the money those
firms' CEOs pocketed for getting them in there, it's a wonder say on
pay didn't pass unanimously.)

'Inching up'

Say-on-pay proponents are playing the expectations game beloved by presidential candidates.

Last
year was only the second time resolutions to adopt say-on-pay votes
were on proxy ballots. So to get an average "for" vote of 43 percent
was "jaw-dropping," says Stephen Davis,
president of Davis Global Advisors, a corporate governance consulting
firm. "This year, we've seen an inching upward. So by comparison with
last year we don't see the same steep rise, but the direction is still
up."

Union and government pension funds and "socially
responsible" mutual funds can pretty much be counted on to vote for
this kind of proposal. Hedge funds and other private equity managers
can mostly be counted on to oppose it. So mutual funds, which vote
corporate proxies on behalf of their money-management clients, could
make the difference.

The larger group of funds is in the middle. At least some favor say on pay.

General support

Last
year T. Rowe Price voted for say-on-pay resolutions about 80 percent of
the time, said Donna Anderson, a corporate governance analyst and
co-chair of the firm's proxy committee. (Mutual funds don't have to
reveal this year's votes until late summer.)

A review of the record shows that Legg Mason managers have also supported at least some say-on-pay proposals.

Like
many groups, Price and Legg leave proxy voting decisions to fund
managers. But Price publishes general guidelines, and they "generally
support say-on-pay proposals," Anderson said. Even so, managers might
balk if a company they owned were singled out in its industry for
say-on-pay treatment.

Most fund companies are not as pro-say as Price. Others with a record of supporting say on pay include Janus, Schwab and Franklin Templeton, according to a union study.

Soon, however, all corporations might be forced to give their shareholders an advisory role on executive compensation.

Price
favors a law requiring it. It's already common in Britain and
Australia, and "we think say on pay generally would be a good practice
to import into the U.S.," Anderson said.

The House of
Representatives approved a bill requiring say on pay last year,
although a Senate version hasn't gone anywhere. Both Democratic
presidential candidates support it.

Even some folks in the
executive suite are getting comfortable with say on pay. According to a
survey by BDO Seidman, 61 percent of chief financial officers at
technology companies favor it.

Letting corporate owners judge
the compensation of executives who work for them isn't exactly a
radical idea. And it's not going away.

jay.hancock@baltsun.com