July 6, 2021
Connection Between Pay Levels & Low Say-on-Pay Vote
A recent Equilar blog takes a look at 2021 say-on-pay vote results so far and like other memos and reports, Equilar projects that 2021 could see the highest failure rate yet. One observation noted in the blog is an apparent trend between the magnitude of CEO pay and the level of support for say-on-pay proposals. Here’s an excerpt:
The overall trend is that of high median CEO compensation paired with low Say on Pay approval – see the blog for a chart showing 2021 median CEO pay vs. say-on-pay approval.
Median CEO pay was around $17 million for companies that fell under 50% approval. This exemplifies that high pay continues to be a matter of concern for shareholders. Though some companies did lower compensation, the data suggests that shareholders may still view it as too high. It is important to note that though shareholders’ reluctance to approve high pay is not a new phenomenon, zooming in on individual companies provides insight into COVID’s role in intensifying this effect.
One failure this year, Starbucks, shows just that. In 2020, Starbucks paid its CEO $14 million, a drop from $19 million in 2019. Starbucks received a 47% vote this year compared to a passing 84% vote last year, despite the lower pay. AT&T witnessed a similar event, failing its vote regardless of an $11 million drop in pay. Walgreens Boots Alliance joined in with CEO pay roughly $1.6 million lower than last year but over a 35 percentage point drop in approval. Though various factors are possibly at play, it’s likely that the pandemic heightened shareholders’ criticism of unnecessarily high compensation. It seems natural that, with economic uncertainty, shareholders are more willing to express disapproval if companies aren’t bearing their share of the burden.
– Lynn Jokela