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The alchemist of the poison pill Martin Lipton says efforts by institutions to have a "say on pay" will take the crafting of executive compensation packages out of the hands of boards and give it to investors -- an idea he called ill-advised at the RiskMetrics' 2008 Governance Conference.
"You're putting the decision-making when it comes to pay packages into the wrong hands if you give it to the shareholders," Lipton told institutional investors, brokers and investor relations officials at the investor advisory group's conference in New York on Tuesday. Lipton, founding partner at Wachtell, Lipton, Rosen & Katz, expressed his opposition to legislation backed by many institutional investors that would give shareholders the ability to have a nonbinding vote on a CEOs pay package, also known as "say on pay." He said that in the U.K., where investors have the ability to cast a public vote on executive pay packages, companies rarely give them the opportunity. The result, Lipton says, is that a small group of U.K. investors control the executive compensation of all U.K. businesses through behind the scenes negotiations. "No one in U.K. wants to incur the wrath of institutors," Lipton said. "They've taken the determination of executive compensation out of the boardroom and delivered it to three shareholders that are large holders." This argument was opposed by at least one institutional investor that said he believed institutions won't be controlling executive pay, but providing a nudge in the direction of aligning pay with performance. "Let's agree to disagree," Lipton responded. He pointed out that companies and compensation consultants realize there is a problem when CEO pay is not tied to performance, a problem many institutional investors have pointed out. But he added that corporations should be left the flexibility to figure out pension packages on their own. One observer at the conference suggested that executives on boards often prohibit meetings between the company's independent, nonmanagement directors and a large shareholder. Lipton said that he would never recommend that executives block such meetings, especially because if that meeting isn't granted it could be followed up with an activist campaign on the part of the investor. But he acknowledged that managers have limited time and can't meet with every medium or large investor. - Ron Orol See additional stories from the RiskMetrics' 2008 Governance Conference CategoriesComments Deal Video
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The Language of the World is a phrase used by Coehlo throughout The Alchemist as a way to describe the way in which we communicate with our world and each other and how the world conversely communicates with us. This idea gets at the essence of Forwarding the Conversation because it is only through purposeful listening that can we find an understanding of The Language of the World, and it is only through the Language of the World that we are able to see our deeper purpose. We must always be willing to attentively listen to our hearts and we must always be willing to follow the path that our heart lays before us.