The Advisors' Blog

– Liz Dunshee

When it comes to pay for performance, CalPERS isn’t messing around. In its recent “Corporate Governance Program Update,” the pension fund reports that it voted “against” 43% of executive compensation proposals this year – up from a prior 5-year average of 16%, and 18% last year.

Any way you slice it, that’s a huge increase. CalPERS says that its enhanced voting practices (pg. 21) – implemented in January 2018 – are driving the change. Here’s more detail:

– Failure to align pay with performance was the primary reason to vote “against”

– Other problematic features driving “against” votes included: short-term performance periods for long-term incentive awards (i.e. less than 5 years), poor disclosure, short vesting periods for equity grants, discretionary awards, and similar metrics used for short- & long-term incentive plans

The report also notes that CalPERS conducted 121 shareholder campaigns last year and voted against 438 directors where diversity engagements didn’t result in constructive outcomes. Diversity – as well as environmental and other human capital issues – will remain a big focus next year.