February 22, 2011
More on “Say-on-Pay Frequency: Confusion Over Vote Counting”
– Broc Romanek, CompensationStandards.com
As a follow-up to my recent blog regarding “Say-on-Pay Frequency: Confusion Over Vote Counting,” here are a few interesting items:
1. As reflected in this nifty chart from our “Say-on-Pay” Practice Area, ExeQuity’s Robbi Fox has been tracking the proxy statements for the S&P 500 companies who have filed so far (as compared to voting results filed in Form 8-Ks) and out of the 36 S&P 500 companies that have filed proxies:
– Abstentions count as against, broker nonvotes have no effect -15 companies (42%)
– Abstentions and broker nonvotes have no effect -18 companies – (50%)
– Abstentions and broker nonvotes count as against – 3 companies – (8%)
2. In her “100 F Street” Blog, Vanessa Schoenthaler analyzes “The Anatomy of a Shareholder Vote Calculation.”
3. Here’s an interesting piece called “Doing The Math On Proxy Odds,” which analyzes the potential use of vote modeling – in the form of “voting power analysis” – typically used in political campaigns in some proxy battles at public companies.
4. I agree wholeheartedly with Mark Borges’ blog last Friday entitled “Is it Worth Making a Triennial Vote Recommendation?” As I wrote in the Winter 2011 issue of the Compensation Standards newsletter in early January, most institutional investors have been vocal about their preference for an annual frequency – even if they didn’t really care about having it from a substantive perspective, they still wanted an annual vote to facilitate their ability to run their own peer comparisons (difficult to do if companies are holding SOP votes in different years). So these institutions decided to seek it from a process perspective.
So I’m not sure why companies continue to recommend triennial now that the early meeting results bear out that shareholders will often reject that frequency (as noted in ISS’s blog on Friday). As Tim Smith of Walden Asset Management emailed me over the weekend, he was initially angry about Dodd-Frank’s midnight addition of a frequency vote – but he’s now glad that frequency is on the ballot because rejecting the triennial recommendation has woken up many shareholders to the power that they now have with say-on-pay. It’s a reminder of what shareholder engagement is all about – listen to your shareholders and act on what they say. Clearly, many companies are choosing to operate in a bubble…
In his “Proxy Disclosure Blog,” Mark Borges gives us the latest say-when-on-pay stats: with 248 companies filing their proxies, 57% triennial; 6% biennial; 32% annual; and 5% no recommendation.