What would this proposal do?
This proposal urges Entergy’s board of directors to adopt a policy that would allow the Company’s shareholders to vote at each annual meeting on an advisory resolution to ratify the compensation of the “named executive officers,” as set forth in the summary compensation table included in the proxy statement.
This annual vote would be advisory only, and would be proposed every year by management.
We believe this proposal – sometimes referred to in the media as “say on pay” – would give Entergy shareholders a powerful means to communicate their views on executive compensation, and could help persuade the Board of Directors to curb excessive pay for top executives at the Company.
Is the proposal binding?
No – our proposal only urges the Board of Directors to adopt the proposal as policy. We believe that Entergy directors will pay attention to the views of shareholders, and that a strong shareholder vote in favor of this resolution will encourage the Board to adopt this common sense proposal as corporate policy.
Who are the “named executive officers”?
Under SEC rules, the Company is required to disclose in its proxy statement total compensation awarded to its “named executive officers.” In general, this includes the principal executive officer, the principal financial officer, and the three most highly compensated executive officers other than the principal executive officer and principal financial officer.
The Company’s proxy statement each year discloses total compensation awarded to these executives in a “summary compensation table.”
Have shareholders at other companies voted in favor of “say on pay”?
Yes. At least ten U.S. companies have adopted policies giving shareholders an advisory vote on executive pay, including Aflac, Blockbuster, H&R Block, Ingersoll-Rand, Littlefield, MBIA, Par Pharmaceuticals, RiskMetrics, Tech Data, and Verizon.
A majority of shareholders at other prominent companies have voted in favor of advisory resolutions urging those companies’ directors to adopt a “say on pay” policy, including Apple, Activision, Alaska Air, Clear Channel, Lexmark International, Motorola, PG&E, and Sun Microsystems.
Isn’t there a bill pending in Congress to give shareholders an advisory vote on executive compensation?
Yes. In April 2007, the U.S. House of Representatives passed the Shareholder Vote on Executive Compensation Act, which would grant shareholders a non-binding vote each year to approve the compensation of top executives at publicly-traded companies. The bill passed the House by a vote of 269-134 on April 20, 2007. A companion bill was introduced in the Senate the same month, sponsored by then-Senator Barack Obama, and was referred to the Senate Committee on Banking, Housing and Urban Affairs.
We believe that Entergy should take the lead in adopting this corporate governance reform, regardless of what happens to this bill in the Congress.
What about other countries?
Australia and the United Kingdom require public companies to conduct advisory shareholder votes each year on the “directors’ remuneration report,” which discloses executive compensation. Although these votes are non-binding, we believe they provide public company shareholders in those countries a powerful vehicle to deliver their views on executive pay to the directors. Sweden and the Netherlands follow similar procedures.
If enacted, would this proposal replace shareholders’ ability to communicate directly with Entergy directors on compensation issues?
No – obviously shareholders could continue to communicate directly with Entergy directors and management on executive pay or any other subject.
In our view, however, a formal shareholder vote each year would provide a more effective means for shareholders to communicate their views on executive compensation, in addition to the random communications Entergy might also receive from individual shareholders.
In addition, this vote would provide directors with useful information concerning shareholders’ views on executive compensation at Entergy that is not otherwise available. We think the proposal therefore clearly promotes the best interests of both the Company and its shareholders.
What does Entergy say about the proposal?
In the Company’s 2008 proxy statement, Entergy’s board of directors argued against our resolution, claiming in part that adopting the proposal might create the “impression” among senior executives that their compensation opportunities “could be limited or negatively affected,” while opportunities at competing companies “would not be similarly constrained.”
We believe this argument is specious, especially considering the extravagant compensation that Entergy directors have awarded to our senior executives. During 2007, Entergy directors approved total compensation for CEO Wayne Leonard worth $26.2 million – an increase of more than 77% over Leonard’s total compensation of $14.8 million in 2006.
In addition, Entergy argues that an advisory shareholder vote would not provide any “meaningful insight” into specific shareholder concerns. We strongly disagree.
When Blockbuster adopted its “say on pay” policy in March 2008, that company’s CEO stated the policy “will not only improve dialogue with our shareholder base, it will also provide our Board with valuable feedback on our compensation policies. . . .” Similarly, Aflac’s CEO asserted in 2007 that an annual advisory vote “is a helpful avenue for our shareholders to provide feedback on our pay-for-performance compensation philosophy and pay package.”
We believe that Entergy shareholders should also have a formal opportunity every year to express their concerns over executive pay at our Company. After all, if directors believe they have successfully aligned executive compensation with shareholder interests, what could be more fair than asking shareholders if they agree?
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