The Advisors' Blog

In this week’s CS webcast, our panelists held an insightful post-mortem on the 2024 proxy season, including Say-On-Pay results. Back in 2022, we saw a dramatic dip in support for Say-On-Pay proposals for the Russell 3000 and S&P 500. In 2023, we saw support increase and 2024 continues that trend. While giving an update on the 2024 Say-on-Pay results, Dave Lynn opined that this trend is perhaps expected given that there were no big changes in ISS and Glass Lewis frameworks & voting guidelines and the market continues to improve since a low in 2022 (and thus, there is less hostility toward exec comp packages).

Tracking those observations, Semler Brossy’s mid-season report shows approvals at levels unseen since 2019. It summarizes preliminary 2024 results as follows:

2024 year-to-date Say on Pay failure rate is well below historical average halfway through the proxy season. Nine Russell 3000 companies (0.8%) have failed Say on Pay thus far in 2024 [compared to 19 companies at this time last year]. Average Say on Pay support for Russell 3000 companies (91.6%) thus far in 2024 is 50 basis points higher than the average support at this time last year.

This Sullivan & Cromwell post on the HLS Blog also delves into preliminary results with the following key observations:

1. Say-on-pay performance improved overall. Across both the S&P 500 and the broader Russell 3000, say-on-pay proposals are passing at a higher rate than in 2023 and are passing with higher support.
2. ISS recommendations were impactful. ISS recommended in favor of a higher percentage of say-on-pay proposals. ISS recommendations appear to have a high correlation with voting outcomes. Every proposal that ISS supported in 2024 passed, while every failed proposal received a negative or do not vote recommendation from ISS. Even if an ISS negative recommendation did not result in a failed vote, they corresponded to significantly lower than average votes.
3. For 2024 failed votes, ISS focused on perceived pay-for-performance issues and lack of rigor/transparency. 2023 failed votes generally were not “sticky”, and none of the companies that had a failed vote in 2024 also had a failed vote in 2023. The key criteria underlying the ISS’s negative recommendations in failing 2024 proposals include pay-for-performance and compensation rationale issues, such as non-rigorous performance goals and lack of transparency.
4. Failed votes focused on a narrower set of industries. The only S&P 500 companies with failed votes in 2024 were industrial and technology companies, whereas companies in the healthcare, real estate and financial sectors also received failing votes in 2023.

– Meaghan Nelson