'Say on Pay' Rejected

For all the complaining that we do about executive pay, it might come as a surprise that investors recently rejected two out of the three "say on pay" proposals at pharmaceutical companies' annual meetings. Shareholders at both Johnson & Johnson and Abbott Labs rejected the idea, and Pfizer's investors just barely passed the resolution.

Investors may have figured that the proposals, which give shareholders only an advisory role, don't have enough teeth. There are other ways to get shareholder opinions. Amgen and Prudential Financial have been gathering opinions online, for example, while other companies, such as Home Depot, have met with shareholders individually or in groups.

Of course, investors have always had a voice: their sell button. Don't like the pay that the board is bestowing on the CEO? Just sell and move on. Or vote out the board members. Remember, shareholders own the company, and the board is supposed to act on their behalf.

"Say on pay" sounds good, but an advisory role really isn't worth very much. It would be a good start for investors to be able to trust managements to increase shareholder value, and for boards to pay executives appropriately. If that's not occurring, however, it's sometimes best to move on.

(Home Depot and Pfizer are Motley Fool Inside Value recommendations and Johnson & Johnson is an Income Investor pick.)