Shareholders can vote on executive pay annually, every two years or every three years. Though their vote will be nonbinding, companies will disclose executive compensation packages in their proxy materials and put it to a vote. Similarly, shareholders will get to vote on severance packages given to executives who leave the company through a merger or acquisition.
"Right now, shareholders don't really have the ability to provide a company feedback about their pay policies. In proxies, companies provide their pay report, but there is no up or down vote," says Julie Tanner, assistant director of socially responsible investing at Christian Brothers Investment Services.
Some companies have voluntarily adopted a policy of giving shareholders a say on pay.
"Seventy companies have voluntarily adopted say on pay, and the Troubled Asset Relief Program, or TARP, companies had to provide say on pay. That was part of the requirement of getting money," Tanner says.
Of the 282 companies receiving TARP funds, 237 reported the results of their pay package votes.
Companies will need to hold a separate vote on golden parachute payout packages when considering merging with another company or in the event of an acquisition.