This excerpt taken from the SIRI DEF 14A filed Apr 30, 2009.
Investors are increasingly concerned about mushrooming executive compensation which sometimes appears to be insufficiently aligned with the creation of stockholder value. Additionally, recent media attention to questionable dating of stock options grants by companies has raised related investor concerns.
The SEC has created a new rule, with record support from investors, requiring companies to disclose additional information about compensation and perquisites for top executives. The rule has now been in effect for over a year. In establishing the rule the SEC has made it clear that it is the role of market forces, not the SEC, to provide checks and balances on compensation practices.
We believe that existing U.S. corporate governance arrangements, including SEC rules and stock exchange listing standards, do not provide stockholders with enough mechanisms for providing input to boards on senior executive compensation. In contrast to U.S. practices, in the United Kingdom, public companies allow stockholders to cast an advisory vote on the directors remuneration report, which discloses executive compensation. Such a vote isnt binding, but gives stockholders a clear voice that could help shape senior executive compensation.
Currently, U.S. stock exchange listing standards require stockholder approval of equity-based compensation plans; those plans, however, set general parameters and accord the compensation committee substantial discretion in making awards and establishing performance thresholds for a particular year. Stockholders do not have any mechanism for providing ongoing feedback on the application of those general standards to individual pay packages. (See Lucian Bebchuk & Jesse Fried, Pay Without Performance 49 (2004)).
Similarly, performance criteria submitted for stockholder approval to allow a company to deduct compensation in excess of $1 million are broad and do not constrain compensation committees in setting performance targets for particular senior executives. Withholding votes from compensation committee
members who are standing for reelection is a blunt and insufficient instrument for registering dissatisfaction with the way in which the committee has administered compensation plans and policies in the previous year.
Accordingly, we urge Sirius XM Satellite Radios Board to allow stockholders to express their opinion about senior executive compensation at Sirius XM Satellite Radio by establishing an annual referendum process. The results of such a vote would, we think, provide Sirius XM Satellite Radio with useful information about whether stockholders view the companys senior executive compensation, as reported each year, to be in stockholders best interests.
We urge stockholders to vote yes for this proposal.
Company Response in Opposition to the Stockholder Proposal
The board of directors recognizes that stockholders have a valid interest in our executive compensation practices, and understands the importance of administering our executive compensation program in a manner that conforms to the highest standards of corporate governance. The board of directors has carefully considered the Stockholder Proposal, and it does not believe that the adoption of the Stockholder Proposal is in the best interests of stockholders. Accordingly, the board of directors recommends that stockholders vote against the Stockholder Proposal for the following reasons.
Our Compensation Committee, which consists entirely of independent directors, is responsible for maintaining a performance-based executive compensation program designed to attract, motivate and retain high-quality executives in a competitive market. As explained in greater detail under Executive Compensation Compensation Discussion and Analysis, our executive compensation program takes a three-part approach to best align stockholders interests with our performance, compensating senior executives using three key elements: base salary, an annual bonus and grants of long-term, equity-based compensation. In making compensation decisions with respect to each element of compensation, our Compensation Committee considers the competitive market for executives and compensation levels paid by comparable companies. The Compensation Committee also reviews from time to time the compensation practices at companies with which we compete for talent. Other factors considered when making executive compensation decisions include individual contribution and performance, reporting structure, internal pay relationship, complexity and importance of roles and responsibilities, leadership and growth potential.
In its consideration and approval of executive compensation, the Compensation Committee makes numerous, complicated and interdependent decisions, all requiring judgment and analysis after careful review of substantial data. The board of directors believes that the Compensation Committee is in the best position to make such decisions, and that in order to continue to attract and retain executives of outstanding ability, the Compensation Committee must continue to possess the flexibility to select compensation incentives that effectively balance various considerations. The board of directors believes that an advisory resolution may negatively affect stockholder value, even if it does not directly impinge upon the Compensation Committees ability to set compensation levels, by creating the impression among our senior executives and potential executive candidates that the Compensation Committees flexibility to select incentives was compromised.
The board of directors believes that the information disclosed under Executive Compensation Compensation Discussion and Analysis and the executive compensation tables provides a significant amount of detailed information as to how the Compensation Committee sets compensation for senior executives, and this information provides a solid foundation for an informed discussion with stockholders. The board of directors believes that an advisory resolution would not add meaningful information to these disclosures, nor would it have any legal consequence on any compensation arrangement. Unlike input we may receive directly from a stockholder, an annual, backward-looking yes or no vote on compensation practices would not provide the Compensation Committee with any useful insight into specific stockholders concerns regarding executive compensation, nor would it provide any specific information that the Compensation Committee could use to improve our remuneration policies. On the other hand, we already have in place corporate governance policies designed to ensure that the board of directors is responsive to stockholder concerns regarding all issues, including executive compensation issues. Under these policies, any stockholder may communicate his or her dissatisfaction with our compensation practices directly to any individual on the
Compensation Committee, or to the Compensation Committee as a group, by sending an e-mail to firstname.lastname@example.org or by writing to any director in c/o Patrick L. Donnelly, Executive Vice President, General Counsel and Secretary, Sirius XM Radio Inc., 1221 Avenue of the Americas, New York, New York 10020.
The board of directors exercises great care in determining and disclosing executive compensation. The board of directors does not believe the advisory vote will enhance governance practices or improve communication with stockholders, nor is it in the best interest of stockholders. Instead, it may very well constrain the Compensation Committees efforts to recruit and retain exceptional senior executives.