February 28, 2024
Trending Executive Compensation Shareholder Proposals
In our recent webcast — “The Latest: Your Upcoming Proxy Disclosures” — Ron Mueller discussed this year’s hot topics for compensation-related shareholder proposals. As we’ve discussed, we saw many proposals seeking shareholder approval of severance agreements last year. Ron noted in his commentary that this proposal is still common.
Ron also discussed three proposals that are new this year. Here’s an excerpt from the webcast:
One is requesting that companies amend their clawback policies […] the supporting statement alludes to the fact that if one executive engages in misconduct and, as a result, payouts are higher than they should have been, then other executives should also be forfeiting their compensation regardless of whether those executives themselves engaged in misconduct.
From the conservative side, there were some proposals out there asking companies to eliminate greenhouse gas reduction metrics as performance measures. More and more companies are including environmental metrics as part of their bonus programs, as one of their performance metrics. Here’s a proposal saying, “No, stop doing that.” It’ll be interesting to see what kind of traction that gets.
Lastly, another new proposal is asking for an annual Say-on-Pay vote on director compensation. As if that’s not novel enough, the two twists on that are that it has to be an advance vote before the directors get paid, not after the fact vote like Say-on-Pay for executives, and the proposal is in the form of a binding bylaw amendment. If it was approved by shareholders, it would go into effect automatically under most corporate law programs and most bylaws.
Ron also noted that it’s not always clear what exactly the proposals are asking for. And, in some cases, companies are increasing their engagement with proponents — especially since institutional shareholders are asking companies what each proposal is asking for, what the company is currently doing on that front and whether it met with the proponent and tried to negotiate out the proposal.
– Meredith Ervine