The Advisors' Blog

This blog features wisdom from respected compensation consultants and lawyers

February 8, 2023

Say-on-Frequency: Do You Need to State the Voting Standard?

When say-on-frequency votes roll around every sixth year, one of the questions that has been asked repeatedly in our “Q&A Forum” is what voting standard to apply. State law and governing documents typically state that all matters are governed by majority votes (with the exception of the election of directors, which at some companies is still determined by a plurality vote). But on this “multiple choice” ballot item, you may end up in a situation where none of the options receive majority approval.

Last week on, Dave pointed out that you don’t need to prescribe a particular standard in the proxy statement:

How do I determine which frequency “wins” the vote?

The Say-on-Frequency proposal is unusual because the issuer is not asking the shareholders to “approve” a specific proposal or resolution. Instead, shareholders are being to select one of three frequency options or abstain from voting. In footnote 121 of the adopting release from 2011, the Commission stated: “Because the shareholder vote on the frequency of voting on executive compensation is advisory, we do not believe that it is necessary to prescribe a standard for determining which frequency has been ‘adopted’ by the shareholders.”

Notwithstanding that disclosure leeway, as John shared in his response to Question #858 on our Form, when your board moves on to actually determine the frequency with which it will submit the say-on-pay resolution, the directors likely do need to consider which of the say-on-frequency options received a plurality vote. That’s because Glass Lewis has embedded the plurality concept into its policy on say-on-frequency. The proxy advisor says that it will recommend votes against all members of the comp committee if the board adopts a say-on-frequency other than the one approved by a plurality of the company’s stockholders.

As I blogged last fall, more than 90% of Russell 3000 companies conduct an annual say-on-pay vote – so this has become a largely irrelevant exercise, but we have to do it anyway.

See Dave’s blog – and the November-December 2022 issue of The Corporate Counsel newsletter – for even more reminders on annual season items. Dave also shared guidance on handling the Form 8-K for this voting item. We also have practical guidance on this topic in the “Say-on-Pay Disclosure Issues” chapter of the Lynn & Borges’ Executive Compensation Disclosure Treatise.

Liz Dunshee