Aflac afl shareholders in May will become the first in the USA to cast votes to approve or disapprove of their company's executive pay.
Aflac announced such a shareholder vote in February, but said it would not come until 2009, when three years of complete pay data are published in proxy tables under new Securities and Exchange Commission disclosure rules.
But the Aflac board decided two years of information was enough for shareholders to weigh a decision, and at a meeting in Tokyo this morning, moved the first annual vote up a year to 2008, when the shareholders will weigh in on what the company is paying CEO Dan Amos and his four highest-paid lieutenants this year.
The shareholder vote will be non-binding. But if they were to disapprove of Amos' pay, Aflac would sit down with major shareholders to see what changes they would recommend.
"Listening to shareholders is how CEOs keep their jobs," Amos said in an interview Friday before leaving for Japan.
Companies are not lining up to follow Aflac's lead. On Nov. 1, Verizon Communications vz became the first, although say-on-pay resolutions have been proposed at more than 60 companies and have received an average 42% of the shareholder vote, says Dawn Wolfe, an analyst at Boston Common Asset Management. More than 50% of shareholders voted in favor of such resolutions at Verizon, Motorola mot, Blockbuster bbi, Ingersoll-Rand ir, Clear Channel Communications ccu, Par Pharmaceutical prx and Activision atvi.
None have yet to adopt. At Activision, the resolution received 69.6%, the highest percentage of any company, according to RiskMetrics Group. Activision did not respond to requests for comment.
At Verizon, the resolution passed by a thin 50.2% of the vote, but company spokesman Peter Thonis says it was adopted because large shareholders said the ability to vote on the compensation of Ivan Seidenberg and future CEOs would be a useful corporate governance tool. The first Verizon vote is scheduled for 2009.
"This is a concept whose time is coming," Thonis says.
Shareholders have increasingly voiced resentment, especially about CEOs who get fired and get lucrative exit packages. In the United Kingdom, which has long required such non-binding votes, shareholders rarely vote pay packages down, but CEO pay there is generally lower than in the USA. Aflac and Verizon will add pressure to other companies to adopt say-on-pay resolutions, Wolfe says.
Amos, who received $5.2 million in salary, bonus and restricted stock, as well as $8.6 million in stock options reported and expensed in 2006, says that he is focused only on the wishes of Aflac shareholders and has no desire to influence a trend. He was the second-most-highly paid CEO among peers in the insurance industry, according to an analysis by the American Federation of State, County and Municipal Employees union. From the time Amos became CEO in August 1990 through October 2007, the company's market value has grown from $1.2 billion to $29 billion.