Microsoft grants shareholders limited 'say on pay'

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Buried deep in Microsoft's preliminary proxy statement is a provision that allows shareholders to vote on management compensation every three years.

The problem with the vote is that it does not count. "Although the vote is non-binding, Board and the Compensation Committee will review the voting results," the proxy says.

In a weak economic environment where many executive pay packages are considered extravagant, shareholder activists and some members of Congress want to see the people who own public companies -- the shareholders -- have a direct say in how the management of those companies are paid.

Microsoft's new provision doesn't accomplish that.

The actual provision reads, "The Board of Directors concluded that providing shareholders with an advisory vote on executive compensation every three years will enhance shareholder communication by providing another avenue to obtain information on investor sentiment about our executive compensation philosophy, policies, and procedures. We believe holding an advisory vote every three years (a "triennial" vote) will be the most effective means for conducting and responding to a say-on-pay vote."

At almost every large firm in the US, these pay packages are set by a compensation committee which is usually made up of a very small number of directors.

The Microsoft 'say-on-pay' action may be a good public relations move, but it won't make a difference to shareholders -- or pay practices -- at all.

Douglas A. McIntyre is an editor at 24/7 Wall St.

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