July 21, 2020
Factors Impacting 2020 Say-on-Pay Vote Outcomes
– Lynn Jokela
A recent Mercer report shows 2020 proxy season say-on-pay votes results have been pretty stable – with support averaging about 91%. Even though the average vote result has been stable, the number of failed say-on-pay votes at S&P 500 companies has ticked up – 9 through May 2020 compared to 7 failed votes for all of 2019 and also exceeding all but one of the prior years.
I blogged earlier this spring about the ISS impact on say-on-pay vote outcomes, which can play a significant part in vote results. The report says ISS has recommended shareholders vote “against” fewer say-on-pay proposals in 2020 when compared to last year and then lists the following factors contributing to say-on-pay failures this year:
– Modification of performance targets to make them easier to achieve
– Lack of quantifiable (vs qualitative) performance metrics
– Lack of transparency around performance goals, lack of goal rigor, and/or use of discretion
– One-off equity grants, especially when not sufficiently performance-based
– Mega grants covering current and future years
– Payment of cash severance on retirement in lieu of forfeited equity