The Advisors' Blog

– Broc Romanek

Here’s the key takeaways from this ISS proxy season review:

– Increase in say-on-pay opposition: The number of say-on-pay votes receiving less than 70 percent support rose to a new high in 2019. The say-on-pay failure rate, which had nearly doubled in 2018, remained at that level this year: 2.5 percent of votes in the Russell 3000 Index received majority opposition. After falling below 96 percent for the first time in 2018, median support rate for say-on-pay proposals was unchanged in 2019.

– Steady growth in median CEO pay: The median pay raise for continuing S&P 500 CEOs was 5.3 percent in fiscal year 2018 (reported during the 2019 proxy season), a relatively slower growth compared to a median raise of 9.5 percent in 2017. The median pay level among S&P 500 CEOs reached a new high of $12.5 million.

– Impact of 162(m) tax code changes is still apparent: The number of companies submitting equity plan proposals for shareholder approval increased somewhat from the low point in 2018, but remained well below historical levels prior to the repeal of tax code section 162(m)—which removed a requirement to reapprove incentive plan metrics every five years. Despite the removal of tax advantages for performance-based incentive awards, the prevalence of performance-conditioned equity awards fell only slightly and the use of non-equity incentive awards increased.

– Shareholder proposals on pay gain some traction: After three proxy seasons without any compensation-related shareholder proposals receiving majority support, two proposals succeeded in receiving majority support during 2019. Both proposals sought the adoption of a clawback policy.