Senior Officers Compensation Disclosures - Proposed Rule April 16, 2012
Mr. Gary K. Van Meter Director, Office of Regulatory Policy Farm Credit Administration 1501 Farm Credit Drive McLean, Virginia 22102-5090
RE: Proposed Rule on Compensation, Retirement Programs, and Related Benefits - 77 FR 3172
Dear Mr. Van Meter:
Thank you for the opportunity to comment on the Farm Credit Administration's proposed regulation regarding disclosures to stockholders on executive compensation, retirement programs and related benefits, which was published in the January 23, 2012 Federal Register.
I agree with and support the points raised in our Association's comment letter. As a client-owner, I offer these additional comments for you to consider:
General Comments I believe our disclosures on executive compensation and benefits are adequate. Our Association conducts an annual client survey, hosts advisory group discussions, and our board members interact frequently with our other client-owners. I have not received any feedback from stockholders asking for more disclosures on executive compensation.
Our cooperative structure means directors are independent from management and that stockholders have the opportunity to hold directors accountable for serving the Association's interests through regular elections. Management members cannot participate in director elections. All voting stockholders each have one vote regardless of stock investment, giving each stockholder equal say in Association matters. Unlike in some publicly-traded companies, Farm Credit Association management does not receive stock options, and has no incentive to manipulate share prices, nor can they serve on the board of directors. This structure adequately protects against executive compensation abuses that other companies have experienced.
Advisory Shareholder Vote I strongly object to any requirement for a non-binding "say on pay" vote for executive compensation. Our board receives a detailed report from our compensation committee each year after a thorough analysis of best practices and peer data on executive compensation, retirement plans, and benefits. We also regularly hire outside experts to assist us with executive compensation and benefits matters, and our compensation committee members receive extensive training on these issues.
A "say on pay" advisory vote from stockholders, who have not been trained or adequately informed on these issues, would undermine our board decisions. Our Association resources should not be spent attempting to educate all stockholders. Rather than imposing this costly process, FCA should deal with any Farm Credit institution board that is not performing its fiduciary duties using its existing enforcement tools.
Significant and Material Event Disclosure We support timely and effective stockholder disclosures related to our Association's financial performance or its safety and soundness. The proposed regulation definition is too broad, and would require disclosures that are not material or significant. This proposal runs the risk of overemphasizing some events that do not impact stockholders. Not every director or senior officer departure requires immediate disclosure.
Conclusion Our cooperative model provides board independence and accountability to shareholders, who each have one equal vote. The current Farm Credit regulations and GAAP requirements already inform stockholders in a way that allows them to hold the board of directors accountable. So, for the reasons noted in our Association comment letter, and this letter, I urge FCA not to adopt this proposed regulation.
Again, thank you for the opportunity to provide input. If you have any questions about my comments, please contact me.
Respectfully submitted,
David Keller
Director 1st Farm Credit Services - Board of Directors