May 24, 2023
Proxy Season Midpoint: Say-on-Pay Still Looking Bright…For Now
So far in 2023, say-on-pay results seem to be improving from 2022 despite decreases in TSR. WTW recently reported on updated say-on-pay results at Russell 3000 companies, and the data continues to confirm the early positive trends:
On the one hand, 2023 say-on-pay outcomes appear to be holding fairly steady. Average say-on-pay support continues to trend around 90%, with negative recommendations from proxy adviser Institutional Shareholder Services (ISS) having a 20 to 30 percentage point downward impact on outcomes.
However, as shown in Figure 1 below, the rate of ISS “no” recommendations for say-on-pay and the overall failure rate has dropped considerably so far in 2023. The 1% failure rate is derived from six failed votes observed to date, which is markedly below the 13 and 22 failed votes observed at a similar time in the proxy season in 2022 and 2021, respectively.
. . . Pay-for-performance disconnects remain the primary issue most investors and their advisers cite when voting against say-on-pay resolutions and pay outcomes are likely driving some of the reduced opposition for say-on-pay this year.
That being said, WTW notes:
It will be interesting to see if the early trend of less say-on-pay opposition continues to play out in the 2023 proxy season. Historically, WTW has tracked a reversion to the mean when all outcomes are ultimately tallied.
– Meredith Ervine