BulletProofBlog the blog on crisis communications

As corporations that accept TARP funds grapple with the reality that they will now have to offer their shareholders a say on pay, leading U.S. regulators continue to support a more prominent investor role in executive compensation issues for all public companies.

Last month, SEC Commissioner Elisse Walter stated that say on pay votes can "help restore investor trust" and encourage "increased shareholder participation" - two goals that SEC Chairman Mary Schapiro has made cornerstones of the Commission' s efforts to return confidence to the marketplace.

The stimulus bill passed February 17 requires the approximately 400 financial and automotive companies participating in the government's Troubled Asset Relief Program (TARP) to annually provide "a separate shareholder vote to approve the compensation of executives." The SEC and Senate Finance Committee Chairman Christopher Dodd have both clarified that the requirement is effective this year.

For public companies, say on pay is an opportunity to communicate transparency and accountability - exactly what is needed the most amidst today' s turbulence. Given the fact that shareholders leaned toward a say on pay 42 percent of the time in 2008 votes, it is clear that they are no longer willing to stand on the sidelines.

In 2008, say on pay proposals won approval at about a dozen companies. Insurer Aflac was the first, carving out a leadership role without the government forcing its hand. Yet not all companies whose shareholders voted for say on pay have expeditiously acceded to those directives. Alaska Air Group shareholders approved a proposal urging an annual advisory vote on top compensation last May, but it wasn' t until late February 2009 that, as activists fumed, the company agreed to include an executive pay vote in its March 2009 proxy statements.

It may be too late to be a first mover on this crucial front, but it is never too late to implement a positive compensation initiative - and to do so directly and decisively.