March 28, 2017
Say-on-Pay: Startling Differences in Fund Voting Practices
– Broc Romanek
Mark Van Clieaf & Stephen O’Byrne have done an analysis of say-on-pay voting at 213 funds that shows startling differences in “voting quality.” The top quartile is 4x better than the bottom quartile – and the top decile is 16x better than the bottom decile.
This is a little technical. Their measure of voting quality is the sum of (1) alignment (r-sq) of SOP vote support with pay equity and (2) percent “no” for companies with 100%+ pay premiums. We calculate a custom measure of pay equity for each fund using 300+ votes to capture the fund’s weighting of external pay equity based on relative TSR, external pay equity based on relative ROIC and internal pay equity.
Their analysis shows that big funds don’t have higher voting quality – and asset owners, on average, are no better than asset managers…
“Funds” includes mutual funds, state pension funds and entities like Canada Pension Plan Investment Board. The voting data is from Proxy Insight – I’m not sure how they get all the data…