Alaska Air now ready for investor 'say on pay'

After nine months in the waiting area, Alaska Air Group is ready to get on board with the idea of giving stockholders a voice on executive pay.

It's about time, because that plane is already pulling away from the gate.

Last May, Alaska Air shareholders approved a proposal urging the company to hold an annual advisory vote on the compensation paid to top management.

The Seattle-based airline became one of about a dozen companies where such "say on pay" proposals won a majority vote last year.

Yet as recently as this past Thursday, the leader of the longtime Alaska Air gadfly group that filed the proposal was fuming that the company hadn't reacted.

"They just ignore this stuff with impunity," said Steven Nieman, a 30-year pilot for the company's Horizon Air subsidiary. "Management teams who turn their backs on 'say on pay' — how much more arrogant can they get?"

Asked about that, the company said Thursday that its directors "haven't made a decision" on whether to follow the shareholders' wishes.

But spokeswoman Caroline Boren said Friday afternoon that board members had just conferred, and that the proxy statement sent to shareholders later this month will give them a vote on executive pay.

Alaska will be climbing on board what's rapidly becoming a bandwagon movement for shareholder "say on pay," propelled by the spectacle of corporate titans such as Washington Mutual and Merrill Lynch collapsing while their executives collected millions.

The federal stimulus bill that passed Feb. 17 requires all companies receiving a piece of the government's Troubled Asset Relief Program (TARP) bailout — now about 400 financial and auto companies — to provide annually "a separate shareholder vote to approve the compensation of executives." Securities and Exchange Commission (SEC) staff said this week it agrees with Senate Finance Committee chair Christopher Dodd that the requirement kicks in this year, not next.

One bailout candidate, the struggling bond insurer MBIA, said Tuesday that its board would go a step further — in addition to an advisory vote for executive pay arrangements, it will subject any one-time compensation awards to a binding vote by stockholders.

Boards can legally ignore a shareholder-passed call for a voice on pay, "but in this day and age, they do so at their peril," says Patrick McGurn, special counsel to the corporate-governance group at RiskMetrics, which advises big institutional investors such as pension and mutual funds.

Insurer Aflac last year became the first to offer shareholders a vote on executive pay. Now the hundreds of TARP recipients must follow suit.

With that, "knee-jerk opposition from management and boards will fall by the wayside," McGurn predicts. What's more, he says, Dodd and his counterpart on the House Finance Committee, Rep. Barney Frank, are intent on "spreading the TARP provision to the broader corporate community" by next year.

Advice, of course, can be ignored; these shareholders votes are only that. And an up-or-down, take-it-or-leave-it vote on a company's executive-pay arrangements is a pretty blunt instrument.

But McGurn hopes that companies — perhaps including Alaska Air — will use this year's proxy season "as a laboratory to experiment with various types of 'say on pay' proposals." That would show the SEC they can use it well, before the government institutes a "one-size-fits-all" approach.

"Companies can draft these in a way they can get direct feedback on issues that matter to shareholders," he says.

In the U.K. and Australia, where such "remuneration reports" caught on a few years ago, says McGurn, the ultimate impact has been that "companies tend to do a lot of outreach (to shareholders) and cure issues before the vote."

That might seem like a great idea to anyone who remembers the outcry among Washington Mutual shareholders in the run-up to its annual meeting last spring.

When WaMu's directors proposed to rejigger the compensation yardstick for executives to avoid some nasty issues — such as the mounting loan losses that finally brought it down — investors rebelled, analysts and proxy advisers blistered the board with incredulous comments, and the board backed away from that plan.

At Alaska Air, the group led by Nieman was poised with a second "say on pay" resolution this year, as well as a few other reform proposals for Alaska Air. It's still not clear whether the other measures will appear on the proxy statement offered to stockholders.

Owners of Alaska Air shares are better off than most investors these days — the company's stock has held up better than the Dow, the S&P 500 and the Dow Jones airlines index over the past three months, one year and five years. Spokeswoman Boren says the company aims to align shareholders and management by giving top executives "modest base pay with opportunity for additional rewards for performance."

Now the company seems ready to trust that its shareholders can properly assess that pay and performance.

Recession-proof

retail tenants

Could an "adult" business be coming to a mall near you?

Some owners of such businesses are looking to take advantage of the downturn in the commercial real-estate market to move out of the retail ghettos to which they've traditionally been consigned, a veteran broker says.

Susie Detmer, senior director of retail services in Cushman & Wakefield's Seattle office, told a recent National Association of Industrial and Office Parks breakfast meeting that purveyors of adult goods and services have been calling lately to inquire about almost every retail-rental property she lists: mixed-use buildings, strip malls, regional centers, you name it.

"Their business seems to be up," she says.

Most landlords historically have been averse to leasing to adult businesses, Detmer says. That's why you'll find them mostly in old buildings along streets like Highway 99.

However, with retail-vacancy rates climbing and rents dropping, adult businesses seem to think now's the time to move to more upscale digs, Detmer says.

She's not aware of any landlord who has succumbed to the entreaties of the flesh merchants — at least not yet.

Wine stores and wine bars also are in the market for new space, Detmer says, and Hard Rock Café plans to move into a remodeled storefront on Pike Street. Her conclusion: Even in a recession, "Sex, booze and rock 'n' roll sells."

Comments? Send them to Rami Grunbaum: rgrunbaum@-

seattletimes.com or 206-464-8541