October 21, 2019
Say-on-Pay: ISS Endorsement No Longer a “Golden Ticket”
– Liz Dunshee
Today’s blog falls in the “be careful what you wish for” category. A recent FTI memo says the diminishing influence of proxy advisors may be contributing to lower say-on-pay support. Here’s an excerpt:
The guarantee of 95%+ shareholder support with a positive ISS recommendation is fading as investors and shareholders are more apt to formulate their own opinions on executive pay matters. Historically, a positive recommendation from a proxy advisory firm (e.g., ISS, Glass Lewis, etc.) signified that shareholders rarely examined a program before voting in favor of it.
Over the past couple of proxy seasons, most large institutional shareholders have conducted their own due diligence in conjunction with their own independent policy positions, even if the proxy advisory firms recommended “for” a say-on-pay proposal. The most notable example of this paradigm shift occurred during the 2018 proxy season: CalPERS voted “against” 43% of say-on-pay proposals for US companies in the Russell 3000, while by comparison, ISS only recommended “against” for 13.5% of these companies.
I admit that CalPERS is an extreme example – but the stats in the memo imply that they weren’t the only cause of lower support at ISS-endorsed companies last year. And that all adds up to a greater engagement burden (opportunity?) for those in the trenches…