The biggest story in executive compensation over the last 12-months was the promulgation and implementation of the new rules on Shareholder Say on Pay (SSOP), including Frequency of SSOP. Despite the fact that the vast majority of companies receive a significant majority vote "For" their SSOP resolutions in 2011, in Fall and Winter 2011 we need to again focus on SSOP for the 2012 proxy season.

First the good news: As of September 12, only 38 companies – maybe 41, depending on how you count – had failed to receive a majority vote in favor of their SSOP resolutions. Out of approximately 2,500 shareholder votes, that figure represents a strong endorsement by most shareholders of their companies' compensation packages. With that kind of success rate, some companies may be tempted to coast in 2012. We urge them not to do so.

However, the bad news is that preparing for SSOP is just as critical in 2012 as it was it 2011. There are several reasons for this. To keep the blog short, I will discuss only one of them today (and the others tomorrow or Thursday).

First, the stakes are higher for this year's SSOP vote because the cost of failure is greater than most executive compensation and corporate governance professionals originally thought it would be. During the 2011 proxy season (roughly September 2011 through May 2012), the common understanding was that Compensation Committee members, the Company and executives would be embarrassed if the Company failed to receive a majority vote "For" its SSOP resolution. Now we know that "losing" the SSOP vote is not just embarrassing, it may well lead to a lawsuit being filed against the Company, each of the individual board members, and the named executive officers (among others). A lawsuit will generate even more negative publicity for the company, the compensation committee, its executives and their compensation package. The lawsuit and this additional publicity likely will make it even harder to win the SSOP vote in future years. Although the lawsuits filed so far appear to be without merit, there is always a risk that the company will lose a lawsuit. Moreover, even if the company "wins" the lawsuit, such as by succeeding on motion to dismiss, that "win" likely will result in significant legal fees (not that there is anything wrong with legal fees).

P.S. The so-called "American Jobs Act" proposed yesterday by President Obama does not appear to have any provisions on executive compensation of benefits, in case you were wondering.

On September 13, 1847, U.S. forces won a major victory over Mexican forces holding Chapultepec Castle west of Mexico City during the Mexican-American War in the Battle of Chapultepec. The efforts of the U.S. Marines in this battle and subsequent occupation of Mexico City are memorialized by the opening lines of the Marines' Hymn, "From the Halls of Montezuma..." Then-Major Robert E. Lee, then-Lieutenant Ulysses S. Grant and George Pickett all participated (in his Memoirs, Grant expressed his strong feeling the this war was not justified and was merely a land grab). Brigadier General John A. Quitman commanded the southern assault during the battle of Chapultepec and received the surrender of the citadel within Mexico City. Quitman moved to Natchez, Mississippi, in 1821. He purchased Monmouth Plantation in 1826, and the plantation would be in his family for around 100 years. Today Monmouth Plantation is an upscale bed and breakfast, which I can highly recommend (along with the rest of Natchez).