Can We Talk – About Your CEO’s Pay?

Aflac shareholders are quacking about executive pay, but longtime CEO Daniel Amos insists that he’s not quaking.

The quacking sound is the growing chatter related to “say on pay” shareholder proposals. These proposals call for shareholders to vote on executive compensation packages. Aflac is the first large company in the U.S. to adopt such an approach.

Although Aflac is not saying much about the structure of its new say-on-pay process, it’s receiving a ton of coverage for the shift, which was initiated via a shareholder resolution last year. Amos told several news outlets that he embraced the change; he also revealed that his 2007 compensation was roughly equal to his 2006 compensation.

The say-on-pay debate is interesting, but until recently it glossed over the larger issue of communications between executive management/the board and shareholders. Forthcoming research from the Millstein Center for Corporate Governance and Performance at the Yale School of Management addresses this gap. A report, to be published in June, examines the “constraints, risks, benefits and sustained commitments by investors and boards to engage in substantive dialogue.”

The initial findings of the report, “Talking Governance: Board-Shareowner Communications on Executive Compensation,” has yielded the following insights:
• Sustained, two-way dialogue between boards and shareholders is rare in the U.S.;
• There is no insurmountable legal obstacle [including Reg FD] to boards and shareholders engaging in constructive dialogue on governance matters, including executive pay; and
• Despite how much we all love Gilbert Gottfried’s vocal stylings, it may be time for Aflac to retire the duck.

In the interest of full disclosure, that last bullet point was not in the report. A sneak peak of the report’s findings is available here.