The Advisors' Blog

This blog features wisdom from respected compensation consultants and lawyers

October 2, 2018

Say-on-Pay: CalPERS Voted “Against” 43% This Year

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.