HP stockholders invited to vote for executive compensation vote

Stephen Withers
Monday, 19 January 2009 02:51

Opinion and Analysis

Still, the HP announcement comes as a contrast to the attitude expressed by Apple's board, which recently announced its opposition to a shareholder motion to introduce an advisory vote on executive compensation.

The proposal comes from the AFSCME Employees Pension Plan, but the Apple board thinks such a move could make it harder to recruit and retain exceptional executives.

At present, stockholders of companies such as Apple have few mechanisms for expressing displeasure with executive salaries. Basically, they can sell their shares or vote against the re-election of the directors that make up the remuneration committee.

Voting out directors is a blunt instrument, as the motivation is not obvious.

In countries such as Australia and the UK, shareholders get a non-binding vote on compensation.

There is a proposal to introduce something similar into US law, and the Apple board has expressed the opinion that it would be in the company's best interests to simply comply with any legislative changes in this regard.

But the HP board has gone a step further, expressing support for the US Congress to enact legislation providing stockholders with an opportunity to express their views on the executive compensation policies of publicly held companies.

Changing economic fortunes mean shareholders will likely be scrutinising executive and board compensation much more closely.

If companies can't sustain profits and dividends, it's reasonable for shareholders to insist that salaries and other benefits paid to senior management and directors are subject to the same cost-cutting scrutiny that results in hundreds - and in some cases thousands - of ordinary employees losing their jobs.