July 29, 2021
Shareholder Proposals: Proponents Losing Interest in Comp Topics…Except “Environmental Performance Metrics”
Although only 7% of shareholder proposals this year have related to executive pay (and none have passed), proposals for compensation linked to environmental performance metrics have increased by 29%. That’s one of the takeaways from this new Sullivan & Cromwell memo, which takes a deep dive into shareholder proposal trends. Here’s an excerpt from page 26:
There was a steep decline in the number of compensation-related proposals between 2012 and 2017, in large part a result of mandatory say-on-pay votes becoming the primary mechanism by which shareholders express concerns over executive compensation. The number of compensation-related proposals leveled out between 2018 and 2020. Proposals submitted this year dropped by approximately 20% from full-year 2020 numbers (48 proposals compared to 58).
Consistent with 2019 and 2020, around half of these proposals reached a vote in 2021, although more avoided a vote as a result of withdrawals and fewer through the SEC no-action process this year. Compensation-related proposals tend to receive relatively low support (averaging 20%), and none passed this year (compared to one in 2020 and two in 2019, each of which were related to clawbacks, which remains the compensation proposal topic with the highest relative shareholder support). ISS supported 50% of the proposals on executive compensation that reached a vote this year, representing a decrease from 76% in 2020 and 70% in 2019, respectively.
The memo goes on to note that shareholder support has dropped for comp-related proposals, including ESG-type proposals, over the last few years. It attributes that to companies being proactive in adding ESG metrics to pay plans, and says that the lower prevalence of environmental metrics in plans (compared to “social” metrics) may be what’s causing proponents to hone in on that aspect with proposals.
As I blogged today on TheCorporateCounsel.net’s Proxy Season Blog, ISS just opened its annual policy survey – and it seeks feedback about including non-financial ESG performance metrics in executive compensation plans, among other executive pay topics.
– Liz Dunshee