Monday, February 26, 2007

SEC Staff Allows Exclusion of Shareholder Advisory Vote on Exec Comp as Misleading

The SEC staff will allow WellPoint, Inc. to exclude a proposal to allow a shareholder advisory vote on the board compensation committee’s report based on the company’s argument that such a vote would be materially misleading under SEC proxy rules, specifically Rule 14a-8(i)(3). The SEC staff saw some basis in the company’s view that the proposal's stated intent to allow stockholders to express their opinion about executive compensation practices would be potentially misleading since shareholders would be voting on the limited content of the new compensation committee report, which relates to the discussions and recommendations regarding the newly mandated Compensation Discussion and Analysis disclosure rather than the company's objectives and policies for senior executive officers as described in the CD&A.

While shareholders casting an advisory vote would likely believe they were voting on the company’s executive compensation policies, argued the company, they would instead be voting on the compensation committee report, which is not even part of the CD&A section of the proxy statement.

Under the SEC’s new executive compensation rules, the CD&A must discuss the objectives and implementation of the company’s executive compensation policies. The compensation committee report states whether the committee has reviewed and discussed the CD&A with management and, based on such, recommended to the board that the CD&A be included in the annual report and, as applicable, the proxy statement.