A follow-up to yesterday's blog. A reader wrote:  "I thought SSOP was an opportunity to vote on executive compensation – not the financial and stock price performance of the company. Do you think shareholders could use SSOP to express dissatisfaction with performance, independent of executive compensation matters?"*

My answer was: SSOP is not supposed to be about dissatisfaction with the company's stock performance, but when you have poor performance, shareholders and their advisors may take any available opportunity to voice their displeasure. This is especially true if the company has increased compensation at the same time as the stock price decreased.

A common thread among companies that lost SSOP this year was lackluster stock performance. In as much as it now appears that most companies in America will have a declining or flat stock price to report for 2011, the challenge for each company will be to demonstrate in the appropriate place in its proxy statement that (i) the company executives' compensation also declined, and/or (ii) the stock price did not decline as much as the company's peer group.

We had to do that for a couple clients last year and found that, if you can truthfully make those statements and support them with a graphic demonstration, shareholders will not automatically vote against SSOP.

Therefore, subject to the preceding sentence, "shareholders could use SSOP to express dissatisfaction with performance, independent of executive compensation matters," but I don't think many will. And some good lawyering in the proxy statement can help. 

*The statement our reader found alarming was:  "Much of the negative sentiment is based on declining performance among companies this year. The bottom line, notes Ferracone, is that investors want to see an increase in their total shareholder return. "Stock price and dividends are the most important indicators to investors," she says."