Addressing an audience at the annual National Association of Corporate Directors conference in Washington on Tuesday, October 16, Oxley said that the so-called say-on-pay proposal currently floated by Rep. Barney Frank, D-Massachusetts and chairman of the House Committee on Financial Services, “will not stop at a nonbinding vote” because there are so many unanswered questions as to how the process would actually work.

Oxley said that while Frank has said to “take the proposal simply at face value,” the Senate would likely have to make amendments to the proposal, as boards try to determine what their responsibilities are if shareholders vote against their pay programs.

“Litigation would not be far behind the Senate,” Oxley suggested.

Say on pay, and executive compensation in general, was very much on the minds of the roughly 600 conference attendees. Having just completed the first proxy season under new Securities and Exchange Commission disclosure rules, much of the focus has turned to 2008—an election year in which executive compensation will likely be a flashpoint issue (presidential hopeful Barack Obama, D-Illinois, created a companion bill to Frank’s).

In a morning session on top proxy issues for next year, Patrick McGurn, special counsel to proxy advisor Institutional Shareholder Services, said the say-on-pay issue—along with proxy access for shareholders to nominate directors—will likely give way to a confrontation between investors and companies if directors don’t immediately reach out and begin discussions with key shareholders.

“The clock is now ticking, and there’s limited time before consensus can be made,” he said, or it “will be mandated like Sarbanes-Oxley.”

A consensus, of course, will be tough. McGurn noted that while 85 percent of investors support a say-on-pay vote, 95 percent of corporate directors are against it.

Later, in a session on executive pay, Pearl Meyer, senior managing director at compensation consulting firm Steven Hall & Partners, said, “Say on pay is going to put us into a morass” and that it would be a huge bonanza for proxy advisory firms like ISS and Glass Lewis.

“If it [the proposal] goes through, buy stock in [ISS parent] Risk Metrics,” she said.

On the same panel, Michael McCauley, director of investment services and communications at the State Board of Administration of Florida, noted that more communication between board members and shareholders is “extremely important” to solving the pay problem.

Many companies are still “very defensive” and “would rather we go away,” he said. “Please talk to your shareholders, have a dialogue and disclose more and we’ll all be better off.”

Filed by Jeff Nash of Financial Week, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com