August 29, 2023
Say-on-Pay: Norges’ Tightened Framework Leads to Votes Against 1 in 10
I’ve blogged before about calls by Norges Bank to simplify executive pay by doing away with performance programs and simply linking it to long-term share ownership. Some experts think this approach makes more sense than using ESG metrics – or any metrics, for that matter.
This year, although Norges recognizes that few have embraced this structure, it tightened its voting policies to identify companies that are “most materially misaligned” with the firm’s preferred approach. This resulted in voting against say-on-pay at 1 in 10 companies during the first half of the year! Here’s an excerpt from their recent 23-page voting report:
Overall, we voted against at least one proposal – including director elections – at nearly 6 percent of all companies based on concerns about CEO pay. The most common concerns were the use of one-off awards like ‘golden hellos’, awards that are paid out over too short a timeframe, and/or cases where we considered the board had not taken enough steps to respond to concerns from shareholders regarding pay in previous years.
We developed a new framework for assessing US packages, leading us to vote against CEO pay at 82 companies where we assessed the package to be unduly costly and where we had significant concerns about structure, out of a total of 142 US companies where we voted against CEO pay.
Here’s more detail on the new framework:
We are using a new framework for evaluating US packages, looking at absolute value, peer comparisons and dilution. We do not vote against pay packages based on size alone. Our aim is to identify the structures we view as most problematic and misaligned with long-term value. For 2023, we applied this stricter assessment to packages worth 20 million dollars or more, leading us to vote against more than half of packages above this level.
Norges notes that it also voted against a small number of directors based on its assessment that the board did not adequately respond to a say-on-pay vote that received low support in the prior year.
– Liz Dunshee