The American Recovery and Reinvestment Act - President Obama’s recently passed stimulus bill - included provisions that would require many companies receiving bailout funds to provide shareholders with a vote on whether they felt the benefits paid to top executives were appropriate. These so-called “say-on-pay” votes have been effective in at least limiting the increases in executive pay over the last several years, as documented in countries that require these votes. Votes on executive compensation allow the board of directors to gauge shareholder satisfaction and make changes, if necessary.

The news now is that not just many, but all, of the firms receiving bailout funds will have to include a say-on-pay vote this year, effective as of February 17. This is based on an SEC interpretation announced yesterday, available here.

MMA has co-filed a half dozen shareholder resolutions on executive compensation in the last two years. These resolutions reflect MMA’s core value of supporting responsible management practices. The news on mandatory say-on-pay shareholder votes for bailout companies is a great step forward, and we hope that such votes eventually become mandatory for all publicly traded corporations.