The Advisors' Blog

This recent 18-page memo from Alliance Advisors recaps major shareholder proposal trends & voting outcomes from annual meetings through August 5th. Beginning on page 11, it summarizes several important compensation-related items that anyone advising on executive pay and human capital issues should be aware of. Here are a few nuggets:

1. Severance Pay: The Chevedden group boosted this year’s count of severance pay proposals to 18 — the most filed in any of the past 10 years when they were largely the purview of organized labor. The resolutions seek shareholder ratification of executive pay packages that provide for severance or termination payments in excess of 2.99 times salary and bonus. The 14 voted averaged 45.6% support and four received majority approval at AbbVie, Alaska Air Group, Fiserv and Spirit AeroSystems. The Association of BellTel Retirees’ long-running campaign at Verizon Communications also tracked up in support to 44.1% from 38.1% last year.

2. Pay Equity: Arjuna Capital and Proxy Impact had greater success this year on gender/racial pay gap reporting, which recorded the highest level of average support (42.6%) since the campaign began in 2015. Two proposals received majority approval at Lowe’s and Walt Disney—the only ones backed by both proxy advisors. Another four were withdrawn at Best Buy, Chipotle Mexican Grill, Home Depot and Target after the companies agreed to annually report their unadjusted gender and racial median pay gaps for all U.S. employees.

3. Performance Metrics: The Investors for Opioid and Pharmaceutical Accountability coalition reintroduced proposals at several drugmakers to exclude legal and compliance costs—particularly opioid-related litigation charges—from incentive compensation metrics. Unlike earlier years when the resolutions garnered less than 20% support, ISS endorsed the 2022 campaigns, which received 47.7% at Johnson & Johnson and 35.5% at AmerisourceBergen.

4. Clawback Policies: Several types of compensation clawback proposals emerged this year as the long-awaited SEC rule undergoes a third round of public comments. In all cases, the resolutions would expand coverage beyond material financial restatements to misconduct that causes financial or reputational harm to the company. Those sponsored by labor funds brought in the highest votes: 46% at Marathon Petroleum, 38.2% at Republic Services and 37% on a repeat proposal at Verizon Communications.

Chevedden’s renewed efforts on this topic—last seen in 2017—fell flat at Citigroup (9.2%) and Wells Fargo (7.3%). They included a requirement that a substantial portion of executive compensation be deferred or forfeited to satisfy legal penalties, irrespective of individual responsibility.

We’ve blogged several times that say-on-pay has also taken a hit this year, especially among S&P 500 companies. The memo walks through that too – and highlights that proponents of compensation-related proposals are tending to target companies that have had “exceedingly low” say-on-pay votes in prior years.

The memo also includes in the “compensation” category of shareholder proposals a resolution about Rule 10b5-1 trading plans. I blogged about that on TheCorporateCounsel.net – including how it relates to the SEC’s proposal on that topic – and it’s something that we’ll continue to monitor.

We’ll be hearing practical guidance on these topics from Alliance Advisors’ Reid Pearson and other experts at our virtual “Proxy Disclosure & Executive Compensation Conferences” – which are only 3 weeks away, coming up October 12-14th! Here’s the full agenda for the Conferences – 18 essential sessions over 3 days. Sign up online (via the “Conferences” drop-down), email sales@ccrcorp.com, or call 1-800-737-1271. Hope to “see” you there!

– Liz Dunshee