The Advisors' Blog

– Broc Romanek, CompensationStandards.com

Recently, Sodali conducted a survey of global institutional investors on whether they endorse say-on-pay and believe that it protects their rights and strengthens the accountability of corporate boards. Here are some of the findings:

– 80% of respondents rated the value of the SOP vote either 4 or 5 on a scale of 1 (lowest) to 5 (highest).
– Strong preference for the SOP vote to be held annually (77% of respondents) and for the vote to be advisory rather than binding (66% of respondents)
– 54% of respondents said they want to vote on general compensation policies rather than on specific elements of compensation.
– Respondents showed a clear preference for voting factors relating to companies’ financial performance. The top score (4.48 on a scale of 1 to 5) went to “performance criteria for short/medium/long term incentives.” The second choice, rated 4.21, was “company financial performance.” Third, rated 4.03, was “imbalance between long-term/short-term incentives.” Fourth, rated 3.97, was “total compensation,” and fifth, rated 3.90, was the “quality of the justification for the remuneration policy.” It is noteworthy that respondents gave by far the lowest rating — only 2.43 out of 5 — to “proxy advisors’ recommendations” as a factor in their SOP vote decisions.
– As for who to dialogue with, the top choices were: “Board chair or lead independent director” (rated 4.37) and “Remuneration committee chair” (4.14), followed by “Board secretary” (3.17) and Investor Relations/Human Resources executive (3.17).
– Only 5.7% of respondents said they “fully trust the analysis and judgment” of proxy advisors. 57% of respondents said that proxy advisors were “helpful but they would also review the company’s information and establish dialogue when appropriate.” 37% said proxy advisors’ views were “informative only but would trust their analysis when strong misalignments with market practices are highlighted.”
– Respondents indicated that following a significant negative SOP vote companies should either “commence outreach and dialogue with shareholders” (77%) or “revise the remuneration policy” (74%) rather than simply writing a letter of explanation (42%).