The recently completed proxy season has yielded a virgin crop of shareholder “say-on-pay” votes, as required by Section 951 of the Dodd-Frank Act. Although not required by Congress, the Securities and Exchange Commission amended Item 402(b)(1) of Regulation S-K to require an issuer to address in its Compensation Discussion and Analysis whether and, if so, how its compensation policies and decisions have taken into account the results of the most recent shareholder advisory vote on executive compensation. This is one of those requirements that sounds good, but is impossible to implement in any rational way.

Under Rule 14a-21, issuers are now required to include a separate resolution subject to shareholder advisory vote to approve the compensation of its named executive officers, as disclosed pursuant to Item 402 of Regulation S-K. But what does voting to “for” or “against” such a resolution really tell an issuer?