The Advisors' Blog

We’re nearing the end of August, and that means asset managers are sharing voting details for the past year. BlackRock shared in its 4th annual “voting spotlight” that where it did not support director elections or management proposals, compensation was one of the most common reasons. In the Americas, the BlackRock Investment Stewardship team voted against 243 directors based on compensation concerns.

In addition, both BlackRock & Vanguard have confirmed that they still aren’t fond of special awards. From BlackRock:

As we note in the BIS Global Principles, we are not supportive of one-off or special bonuses unrelated to company or individual performance. Where discretion has been used by the compensation committee or its equivalent, we look to the board to disclose how and why the discretion was used, and how the adjusted outcome is aligned with the interests of shareholders.

As a result, BIS supported executive pay at fewer companies that made out-of-plan awards in 2022-23 proxy year because, in our view, these awards were increasingly unrelated to company performance and the financial interests of long-term shareholders like our clients.

As for Vanguard, it shared this cautionary tale in its investment stewardship report:

At one company’s 2023 annual meeting, the Vanguard-advised funds voted against Say on Pay because of concerns about the relative size of the pay program and the lack of performance conditions in a one-time equity grant. The CEO’s five-year employment agreement provided for a $50 million special award of time-vesting restricted stock units. When evaluating these awards, we generally look for rigorous performance criteria as a requirement for vesting, as opposed to only the passage of time.

If the title of this blog looks familiar, it’s because investors & proxy advisors said pretty much the same thing last year. BlackRock also commented earlier this year on how complex performance-based pay programs may be leading to more special awards – and I shared points to think about before heading down the “special award” path.

All that said, both asset managers were generally supportive of say-on-pay and other management compensation proposals over the past year. Vanguard also had this to say about the SEC’s new “pay versus performance” rule:

During engagements, company leaders and directors shared how they planned to modify their disclosures to improve the usefulness of their compensation-related disclosures to shareholders. On behalf of the Vanguard-advised funds, we support consistent, comparable disclosure.

– Liz Dunshee