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Showing posts from April, 2016

Mutual Funds and Say on Pay for CEOs

Shareholders of publicly traded companies have an important job of providing a system of checks and balances on the company's corporate governance, including executive pay plans. Agents of the company (executives) have an inherent conflict of interest in maximizing their own wealth versus maximizing the wealth of the principals (shareholders). You can look back to 2008 and come up with a slew of examples illustrating this principal-agent problem, which in part provided the impetus for the 2010 "Say on Pay" rules in the Dodd Frank Act.

Bloomberg recently had an intriguing article showing how the largest shareholders of publicly traded companies -- mutual funds -- generally fall in line with corporate boards for executive pay decisions but some notable outliers exist, having a more discriminating view of these pay plans and advocating for shareholder interests.

The "most agreeable" of the mutual fund giants voted with directors on executive pay plans 97 percent …