The Advisors' Blog

I recently shared this Gibson Dunn memo on The Proxy Season Blog on TheCorporateCounsel.net. It is chock full of important takeaways from this proxy season. Notably, it flags that executive compensation shareholder proposals increased 108% from 2022. The increase was mostly related to numerous proposals focused on executive severance agreements, which were already a trending proposal topic in 2022. Here’s info from the memo on how they fared so far in 2023:

In 2023, 75 proposals focused on executive compensation were submitted, up from 36 proposals in 2022. This increase was largely attributable to the marked increase in proposals seeking shareholder approval of certain executive severance agreements, the most common executive compensation proposal received by companies.

Forty-seven proposals requesting boards seek shareholder approval of severance agreements were submitted in 2023, up markedly from 16 such proposals in 2022. These proposals typically requested that boards seek shareholder approval of any senior manager’s new or renewed pay package that provided for severance or termination payments with an estimated value exceeding a certain multiple (usually 2.99x) of the executive’s base salary and bonus. At least 43 of these 47 proposals were submitted by John Chevedden and/or his associates.

Nine companies sought to exclude these proposals via no-action requests, seven of which were successful on procedural grounds. The two remaining companies were denied relief, one arguing for exclusion on procedural grounds and one on substantial implementation grounds. Proposals seeking shareholder approval of severance agreements that went to a vote received average shareholder support of 23.8%, with two proposals receiving majority shareholder support. At numerous companies, voting results were significantly affected by whether companies already had in place or, in response to the proposal, adopted policies addressing key aspects of the proposal.

As Liz has blogged, a majority of large-cap companies provide severance in excess of this threshold, and any policy to limit severance benefits as a result of these proposals could have unintended consequences.

– Meredith Ervine