The Advisors' Blog

– Broc Romanek, CompensationStandards.com

Much has been written about the first year of mandatory say-on-pay for most companies here in the US. But how has say-on-pay fared in Europe, where it has been mainstream for a bit longer. Here is news from Ted Allen of ISS:

In Europe, it appears that greater engagement has helped dampen investor dissent over executive remuneration this proxy season. In the United Kingdom, it is notable that just one firm (easyJet) has seen its pay practices voted down. At that company, there was a dispute with the founding shareholder, so that was not a typical instance of investor dissent. In previous years, a couple of U.K. companies with early meetings had usually been punished by investors by this point.

In the Netherlands and Sweden, where “say on pay” votes are long-standing agenda items, investors also have not voted down any remuneration reports. (By contrast, 13 U.S. companies have failed to receive majority support for their pay practices this year.)

One reason for this muted opposition could be the amount of engagement this season. It appears that companies in the U.K. and Continental Europe made a greater effort this year to engage with investors and proxy advisory firms. In addition, the EU Shareholder Rights Directive is prompting issuers to deliver their agenda materials to investors sooner, which is leaving more time for engagement.

One trend that may in part reflect greater advance consultation between issuers and their key shareholders is the large number of U.K. firms that have decided to follow a recommendation in the U.K.’s Corporate Governance Code and hold annual elections for all directors. A majority of FTSE 100 companies have adopted this reform. There also has been reasonable take-up by smaller companies outside the FTSE 350, which are not required to comply. In addition, several Irish companies, including CRH Plc, have agreed to hold annual elections.