June 16, 2014
Shareholder Proposals: Accelerated Vesting of Equity Following M&A
– Pat McGurn, ISS
While somewhat forgotten in the rising tide of advisory votes and say-on-nay campaigns, some compensation related shareholder proposals continue to gain momentum. Notably, the 2014 season provided a breakout opportunity for opponents of accelerated vesting of equity awards following M&A transactions. For the first time since 2010 when the proposals first appeared on ballots, majority tallies were recorded. The breakthrough votes came at four firms: Boston Properties, Dean Foods, Gannett and Valero Energy. Average support based on results for 19 proposals stands at 36.2 percent, up from 33 percent (based on results on 31 proposals) in 2013.
With this break from the pack, the numbers of pro rata vesting proposals might proliferate next year. The topic might draw some proponents away from another long-standing topic – stock retention and holding requirements. Proposals asking senior executives to hold more of their equity holdings to (or thru) retirement continue to be ballot staples, but their average support (currently 23 percent of the votes cast based on 25 results) appears to have leveled off. Notably, none of these proposals urging boards to adopt more robust stock ownership guidelines for senior executives broke the 50-percent support barrier this year.
Some other pay-related topics continue to be magnets for vote support. Clawback proposals drew strong support at BB&T (34.6 percent of the votes cast) and Whole Foods Market (36.8 percent). Results at retailing giant Wal-Mart, meanwhile, came in at 14.7 percent support, or roughly 38 percent of independent support when discounting the company’s insider block. Calls to allow shareholders to approve outsized severance packages also drew high numbers at Verizon Communications (39 percent) and Kindred Healthcare (73.4 percent).