Silence on pay at Rite Aid __»

There’s been a lot of talk in Washington and elsewhere lately about investor protections, although, understandably, it has mostly been secondary to proposals intended to safeguard the economy and the markets as a whole.

Two of the investor-protection proposals most commonly raised would give ordinary shareholders more of a voice: proxy access measures that would make it easier for shareholders to nominate directors, and “say on pay” provisions that would let them vote annually on executive compensation.

Word is that federal lawmakers are preparing to water down proxy access language that made it into both House and Senate versions of the pending financial-regulation bill, by limiting proxy rights to stockholders owning at least 5% of a company’s shares. (Interestingly, former SEC chief accountant Lynn Turner dug up this 2007 letter in which Sen. Chris Dodd and other Democrats chided the SEC’s chairman at the time, Chris Cox, for considering a similar 5% limit.)

Meantime, over at Rite Aid (RAD), the drug-store chain and footnoted frequent flyer, we have another view of shareholder involvement — one that leaves us once again wondering why so may executives and board members are so vehemently against these kinds of proposals. We’re told that, at Wednesday’s lively two-hour annual meeting, Rite Aid shareholders handily defeated a proposal to give themselves an advisory vote on annual executive compensation, 78% to 22%. (A Rite Aid spokeswoman declined to confirm the tally, saying the company hadn’t yet made the results of the meeting public.)

Rite Aid’s board opposed the proposal, arguing that, to explain its pay decisions to investors, the board would have to divulge sensitive information that could aid competitors; and that a simple no vote “cannot be expected to provide the Company with meaningful information” because the directors wouldn’t have an earthly idea what it was that shareholders actually objected to.

The AFL-CIO, which is backing unionized Rite Aid employees working without a contract for five years, pushed for the measure. Its Office of Investment proposed it, and members staged a vocal rally outside a hotel in Harrisburg, Pennsylvania.

Meantime, over at, Broc Romanek notes that a few hundred companies have say-on-pay proposals on their ballots this year — and as of May 26, three of them had given pay packages a thumbs-down. If legislation makes such votes routine, he adds, and changes the way that broker non-votes are counted, the results would surely be more impressive.

“There were no organized campaigns against the pay packages at these three companies. This was a pure grass roots movement. With organized campaigns, imagine the level of votes.”

Still, it’s just three companies, and Rite Aid is hardly alone in seeing its shareholders turn down even the opportunity for an annual vote on executive pay. And let’s face it, if Rite Aid shareholders can’t muster up the energy to ask for a say on pay — Mary F. Sammons, chairman and (until yesterday) CEO, has collected $16.9 million in compensation since 2006, even as the stock has fallen by two thirds — how much enthusiasm will investors as a whole be able to summon if it becomes routine? (Update: In a statement on the union protest, Rite Aid naturally offered a different view of Sammons’ performance, quoting newly minted CEO John Standley as thanking her “for her many contributions to our company the last 10-1/2 years. Without her I do not think we would have a company today.”)

Don’t get us wrong: We’re all for giving shareholders more of a voice on compensation. We just haven’t seen enough evidence of a looming shareholder rebellion to justify all the fear and loathing among directors and executives.

Michelle has written before about Rite Aid Syndrome, a close cousin of Soviet Economy Syndrome. Now we’re beginning to wonder if Rite Aid shareholders don’t have Stockholm syndrome — the tendency of some hostages to begin to feel close to their captors.

Then again, maybe by now the dissatisfied shareholders have voted with their feet, leaving only the oblivious and the unconcerned.


Despite being overshadowed by the big global-catastrophe issues, corporate governance and investor protection are getting some attention in the financial regulatory reform bill under negotiation between the houses of Congress. Democratic leaders want to give President Obama a draft to take to this weekend’s G-20 meeting in Toronto, and to pass the final legislation by July 4. Some of the write-ups we’ve found on the measures that will most directly affect investors follow — let us know if you can recommend others.

  • Harvard’s Lucian A. Bebchuk pens a passionate appeal on the importance of proxy access — and the risks of legislating a 5% ownership threshold — over on the New York Times DealBook blog.
  • RiskMetrics on Tuesday listed the areas where conference-committee negotiators had found agreement on investor-protection issues.
  • InvestmentNews yesterday looked more closely at proposals to tighten the fiduciary standard for brokers.
  • Also on Tuesday, Reuters ran thumbnail sketches of most of the major provisions, including tightening fiduciary standards for brokers, proxy access and say-on-pay.
  • And this LA Times piece by Janet Hook offers a glimpse of where things stood late last night, while this CNNMoney piece looks ahead to today and Friday.
  • Official congressional updates tend to lag: The latest Senate Banking Committee update on the conference committee negotiations, sadly from Monday sometime, notes areas of agreement on several investor and executive-pay issues. The House Financial Services Committee updates have fewer details.

Image source: johnsnape via Flickr


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