The Advisors' Blog

This blog from the Freshfields team summarizing their very comprehensive report “Trends and Updates from the 2024 Proxy Season” notes that annual meeting and proxy season compensation considerations are “expanding beyond say-on-pay and approval for company equity plans” since “this year a variety of executive compensation proposals emerged.” Pages 77 to 80 of the report describe the over 65 known compensation-related proposals submitted as of mid-June:

– 33 proposals requested shareholder approval of termination pay for executives exceeding 2.99x the sum of the executive’s base salary plus target short-term bonus
– 12 proposals requested the company broaden the scope of existing management and executive clawback policies
– 6 proposals requested companies adopt policies requiring named executive officers and certain others to retain a percentage of stock acquired through equity programs until reaching retirement age

Liz previously blogged about a proposal uniquely structured as a binding bylaw amendment (rather than a precatory request) that sought to fix director compensation at $1* absent shareholder approval. Michael Levin of The Activist Investor recently discussed how this proposal fared — it was either omitted from the proxy or received single-digit support, with an average support rate of 2% — and the limited feedback the proponents received from various parties during the process. We recently connected with Aon’s Karla Bos on this topic, and she shared these thoughts with us:

Given the binding nature, there have to be significant concerns before many institutional investors will take that level of flexibility away from a company, especially on a prospective basis and as directors are taking on more and more oversight.

I strongly believe that many institutions do not relish the idea of spending their already too limited time considering and engaging on another recurring ballot item when they believe they have adequate and even more appropriate recourse to address areas of concern.

That said, the binding proposal approach at well-targeted companies could still be something to watch in general as investors continue to seek new ways to make themselves heard, especially since companies may well respond to vocal messaging and engagement even when support for the associated proposals has not been high.

*Has anyone else only recently noticed that $1 won’t even pay for a single item from a fast food “dollar” menu anymore!?! The things I learn during summer road trips…

– Meredith Ervine