Holman Jenkins has an article in yesterday's WSJ on Aflac (AFL) and their “say on pay” provision which allows shareholders to have some input on executive salaries. As many of you know, I’m a huge of Aflac and I think it’s an outstanding company. Most people know it for the duck, but few realize just how profitable it is.

Say on pay has generated a great deal of positive press for Aflac, and for that, I’m grateful. However, I think “say on pay” might be a bit overrated and I’d be leery of seeing it become the next shareholder fad.

What’s often overlooked is that Aflac is a closely held company with much of the shares resting in the hands of the Amos family. Dan Amos, the current CEO, is the son and nephew of the Aflac’s founders. The effect of this is that a very small portion of Mr. Amos’ wealth is tied to his yearly salary. Instead, he owns nearly 10 million shares, which makes him about two-thirds the way to being a billionaire. In other words, he can easily afford to have his pay the subject of shareholder debate. It’s almost a trivial amount compared with what he makes as an owner.

Jenkins writes:

Media outlets have fallen all over themselves since Aflac's adoption of "say on pay," but they seldom find room to include Mr. Amos's actual views on executive compensation. For one thing, he doesn't think every company should be required by law to adopt "say on pay." He took up the idea himself only because it was brought to him by activist investor shop Boston Common Asset Management, and then only because he figured more "transparency" might improve the atmospherics around executive compensation and help "calm down" public neuralgia.

Amos is right—not every company should be required. I’d add that many companies shouldn’t do it voluntarily. A good example might be a small-cap tech company going through a corporate restructuring. The best way to lure an experienced outside CEO with could be to pay well above the going rate. Given the legal and technical challenges a company like that faces, a “say on pay” proviso might not be in the companies’ best interest.

I’d prefer to see the subject of executive compensation shift to how much value the executives have “at risk.” That would be far more accurate and I think it would deflate much of the current hysteria directed at executive pay.

• GFI Group and Tullett Preston in Merger Talks   »
• GSE Systems, Inc. Singular Research's Annual "Best of the Uncovereds" Conference Presentation  »
• Leucadia's Key to Success  »
• Moody's Latest Blows Satire Models' Circuits   »
• The Reality of Real Estate and the Economy  »

Eddy Elfenbein

• Bio & more articles
• Visit 'Crossing Wall Street'