– Liz Dunshee
Wow. Here’s the latest Semler Brossy memo tracking say-on-pay results for this season, which was published last Thursday. Three takeaways jump out:
– The current failure rate (4.2%) is 2x higher than the failure rate at this time last year (2.1%); however, it is still early in the season and we will monitor whether the failure rate remains at an elevated level following annual meetings for the 12/31 FYE filers
– 13.6% of companies thus far have received an “Against” recommendation from ISS, which is nearly as high as any full-year “Against” rate observed since 2011
– The average vote results of 89.0% for the Russell 3000 and 87.1% for the S&P 500 thus far in 2021 are well below the average vote results at this time last year
At least three more failures rolled in since this memo was published. Here’s a WSJ article about two of them, and one company’s comp committee members also faced a “vote no” campaign for approving mid-stream changes to the CEO’s inducement grant. Diving into company-by-company results underscores what an unusual season this is, because there also have been several high-profile votes at which say-on-pay technically passed, but received less than 70% approval.
Coming in below the 70% level is dangerous because ISS will recommend against comp committee members next year if it doesn’t feel the board adequately responds to shareholders’ pay concerns. Moreover, a low say-on-pay vote can be “blood in the water” for activists.
If you haven’t held your meeting, keep up your engagements. We could be seeing a lot of changes to comp plans next year…