June 14, 2010
Shareholder Proposals: An Early Look at “Say-on-Pay” Results
– Ted Allen, ISS
Overall, support for shareholder “say on pay” proposals seeking annual advisory votes has remained robust this season, but has declined slightly from last year. As of May 26, pay vote proposals were averaging 44.5 percent support (based on votes “for” and “against”) at 32 companies, according to ISS data. At this time last year, support averaged 47.2 percent at 55 companies. There have been nine majority votes this year, including 50.3 percent support at Halliburton and a 52.7 percent vote at Williams Companies.
Pay vote proponents offer several explanations for this year’s results. One factor is the smaller pool of companies with significant pay concerns that haven’t already agreed to conduct pay votes. Since last July, the number of firms that have voluntarily agreed to hold pay votes has nearly tripled to 70. Most of the issuers acted in response to majority-supported shareholder resolutions. Among them were Tupperware Brands, Lexmark International, CVS Caremark, Hain Celestial, Valero, and Prudential Financial, which all saw more than 60 percent support for “say on pay” proposals in 2009.
Tim Smith, a senior vice president with Walden Asset Management, said there hasn’t been a meaningful decrease in investor support for advisory votes. “2010 demonstrates continuing strong voting support by investors, growth in the number of adopting companies, and many companies [argued] that they were waiting on final legislative guidance before they move to establish their own ‘say on pay’ policies,” Smith told ISS. “In addition, we saw dramatic votes at Occidental and Motorola where investors utilized the SOP vote to vote no [on compensation].”
John Keenan, a strategic analyst with the American Federation of State, County, and Municipal Employees, points out that the average support increased by 0.2 percentage points at companies where the issue was on the ballot last year and this season. The largest jumps in support occurred at WellPoint (15.7 percentage points), Allstate (12.4) and Walt Disney (9.1). Meanwhile, support fell by 10.9 percentage points at Dow Chemical and by 6 points at Waddell & Reed, which both had special solicitations this year against the proposals.
This year’s average also includes results at three companies (Edison International, Wells Fargo, and Bank of America) that agreed to hold advisory votes, and thus one would expect to see less investor support, Keenan said.