This excerpt taken from the GIS DEF 14A filed Aug 10, 2009.
ADVISORY VOTE ON EXECUTIVE COMPENSATION
We expect the following proposal to be presented by a stockholder at the Annual Meeting. We will provide our stockholders with name, address and share holdings information for the proponent promptly upon receipt of an oral or written request. In accordance with SEC regulations, the text of the stockholder proposal is printed verbatim below.
RESOLVED, that shareholders of General Mills request the board of directors to adopt a policy that provides shareholders the opportunity at each annual shareholder meeting to vote on an advisory resolution, proposed by management, to ratify the compensation of the named executive officers (NEOs) set forth in the proxy statements Summary Compensation Table (the SCT) and the accompanying narrative disclosure of material factors provided to understand the SCT (but not the Compensation Discussion and Analysis). The proposal submitted to shareholders should make clear that the vote is non-binding and would not affect any compensation paid or awarded to any NEO.
Investors are increasingly concerned about mushrooming executive compensation especially when it is insufficiently linked to performance
In 2008 shareholders filed close to 100 Say on Pay resolutions. Votes on these resolutions averaged 43% in favor, demonstrating strong shareholder support for this reform. Public sentiment and Congressional concern about executive compensation has reached new levels of intensity.
An Advisory Vote establishes an annual referendum process for shareholders about senior executive compensation. We believe the results of this vote would provide General Mills board and management useful information about shareholder views on the companys senior executive compensation.
In its 2008 proxy Aflac submitted an Advisory Vote resulting in a 93% vote in favor, indicating strong investor support for good disclosure and a reasonable compensation package. Daniel Amos, Chairman and CEO said, An advisory vote on our compensation report is a helpful avenue for our shareholders to provide feedback on our pay-for-performance compensation philosophy and pay package.
A number of other companies have also agreed to an Advisory Vote, including Ingersoll Rand, Verizon, MBIA, H&R Block, Blockbuster, and PG & E. And approximately 400 companies under TARP are now implementing the Advisory Vote providing an opportunity to see it in action.
Influential proxy voting service RiskMetrics Group, recommends votes in favor, noting: RiskMetrics encourages companies to allow shareholders to express their opinions of executive compensation practices by establishing an annual referendum process. An advisory vote on executive compensation is another step forward in enhancing board accountability.
The Council of Institutional Investors endorsed advisory votes and a bill to allow annual advisory votes passed the House of Representatives by a 2-to-1 margin in the last Congress. We expect this legislation will pass in the near future.
We believe existing U.S. Securities and Exchange Commission rules and stock exchange listing standards do not provide shareholders with sufficient mechanisms for providing input to boards on senior executive compensation. In contrast, in the United Kingdom, public companies allow shareholders to cast a vote on the directors remuneration report, which discloses executive compensation. Such a vote isnt binding, but gives shareholders a clear voice that could help shape senior executive compensation.
We believe that a company that has a clearly explained compensation philosophy and metrics, reasonably links pay to performance, and communicates effectively to investors would find a management sponsored Advisory Vote a helpful tool.
The board of directors unanimously recommends a vote AGAINST the proposal for the following reasons:
The board of directors welcomes the development of practices that encourage board and management accountability and clear, meaningful communication with our stockholders. The board believes that stockholders should provide direct input to companies and strongly supports substantive dialogue with stockholders. We speak directly with our stockholders about issues of concern to them, including executive compensation. However, the board believes that a stockholder advisory vote on executive compensation will not enhance communications between General Mills and its stockholders and would not be in the best interests of the company. Furthermore, in light of pending legislation that would establish common parameters for a stockholder advisory vote on executive compensation at all public companies, it would not be an efficient use of the companys resources to implement potentially conflicting measures in advance of the development of a uniform system.
Say on pay is soon likely to be enacted by legislation. There now appears to be broad support in Congress and the executive branch for legislation mandating a stockholder advisory vote and related rulemaking. The Obama administration has announced its endorsement for say on pay legislation, which if enacted, would require public companies annually to hold a stockholder advisory vote on executive compensation. Recent say on pay legislation introduced by Congressman Barney Frank has passed in the House of Representatives. It would not be the best use of the companys time and resources to develop and implement an advisory vote when the substance of the resolutions and the procedures for carrying out the vote will likely be established by law in the near future.
We communicate directly with our stockholders about issues that are important to them. Senior management of the company meets directly with stockholders throughout the year. We ask our stockholders about their specific
areas of interest or concerns. Where stockholders have had questions about our corporate governance practices or executive compensation arrangements, we have scheduled meetings to address their concerns. We engage in positive discussions with all proponents of stockholder proposals and respond to written communications from stockholders. Our Investor Relations Department also is available to answer questions on a daily basis. Stockholders may directly contact any of the companys directors, any committee of the board (including the compensation committee), the boards non-employee directors as a group or the board generally. Our stockholders also have an opportunity to ask directors questions at the annual meeting of stockholders. To build on our commitment for meaningful stockholder engagement, we will continue to enhance our practices for contacting stockholders to discuss governance, compensation and other matters. The board believes that these opportunities for direct engagement and discussion are a more effective and productive means for stockholders to communicate any concerns about our executive compensation practices.
Our compensation practices and programs serve the interests of our stockholders. The overriding objective of General Mills is to achieve financial performance that consistently ranks in the top tier of results from our consumer products industry peer group, which in combination with an attractive dividend yield, we believe will continue to deliver strong total returns for General Mills stockholders. The companys total stockholder return has consistently exceeded the return of broad market indexes, such as the Dow Jones Industrial Average, S&P 500 Index, and S&P Packaged Food Index, over the short (1 and 3 years), medium (5 year) and long term (10 and 20 years). We link our executive officers compensation to the financial performance of the company. Approximately 80% of total compensation for the named executive officers varies with annual company performance, with the only fixed compensation elements being base salary and certain employee benefits. The board believes that the companys executive compensation programs have been effective at rewarding the achievement of superior results, appropriately aligning pay and performance and creating an ownership culture in which company managers think and act like stockholders. The programs have also enabled General Mills to attract and retain some of the most talented executives in the global consumer products industry. The proponent has not raised any concerns or issues with respect to our compensation programs or practices.
An advisory vote is too general to effectively convey any meaningful information regarding our executive compensation. Compensation decisions involve a complex analysis that accounts for peer group compensation practices, determinations of corporate financial and individual performance and an assessment of the individuals role in the organization. The proposed advisory vote would not provide the board or compensation committee with any specific information about whose compensation is at issue, the amount or type of compensation at issue, the extent of the stockholders concern or the stockholders preferred approach. We are concerned that stockholder votes cannot effectively guide the companys compensation practices and may in many instances amount to counterproductive protest votes.