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The Say on Pay

The average pay in 2010 for the chief executive of a Standard & Poor's 500 company was $11.4 million.

Salary: $1.1 million, according to the AFL-CIO's Pay Watch. Bonus: $251,413. Stock awards: $3.8 million. Option awards: $2.4 million. Pension and deferred compensation: $1.2 million. Other: $215,911.

Dispiriting, if you're the average wage earner ($44,410) or investor in a mutual fund.

At which point, another union, the American Federation of State, County and Municipal Employees, last week weighed in with its latest report on how effectively mutual funds use their voting power to rein in executive pay.

The union analyzed 26 of the largest mutual fund families' voting patterns on compensation proposals in 2010. The union cited Vanguard, the largest mutual fund family, as doing "the least to constrain executive pay" last year.

This is somewhat surprising since the same union cited Vanguard in 2006 for its efforts to limit executive compensation. The firm has not changed any of its proxy voting guidelines. Vanguard, for its part, takes issue with the report's methodology, citing the limited number of votes examined, for instance.

Vanguard, BlackRock, ING and Lord Abbett-the four greatest "pay enablers"-supported management proposals on pay 90% of the time, shareholder proposals 7% of the time and approved directors from whom a large percent of shareholders withheld support 80% of the time, AFSCME said.

But it's unfair to single out any one mutual fund firm, on this score. In a study of proxy voting trends of registered investment companies for the years 2007 to 2009, the Investment Company Institute said in November that mutual fund firms were supportive of shareholders' moves to curb pay.

In 2009, funds voted nearly 60% of the time in favor of shareholder-sponsored say-on-pay proposals, the ICI found.

Funds though voted roughly 80% of the time in favor of management-sponsored say-on-pay proposals.

The ICI said: "These proposals, which are fundamentally different from shareholder say-on-pay proposals, give shareholders the chance to express approval or disapproval (on an advisory basis) on executive pay packages.

"Thus," it said, "funds expressed disapproval of executive compensation packages nearly 20% of the time."

Maybe that's just not enough to rein in those packages. You think?