November 25, 2024
Say-on-Pay: Responsiveness & Peer Conformity Drove This Year’s High Support
We’ve patted everyone on the back a few times about this year’s record-low failure rate for say-on-pay. We also saw much lower rates of ISS opposition. This Pay Governance memo takes a close look at factors that may have contributed to this result, including:
1. Significantly better performance on the ISS Multiple of Median (MOM) test. The MOM test evaluates the ratio of 1-year CEO pay to the median CEO pay of the ISS-selected peer group and has historically been (and continues to be) a meaningful predictor of adverse ISS SOP recommendations. The average MOM outcome was 1.7x in 2024, compared to 2.2x in 2023 and 2.4x in 2022, demonstrating a migration of CEO pay toward peer median levels and fewer outlying pay packages.
2. Improvement in Compensation Committee responsiveness to proxy advisor and shareholder concerns over executive pay. We observed fewer Compensation Committees being criticized by ISS for poor responsiveness to shareholder concerns and fewer cases of significant one-time awards that led to an against SOP recommendation. In addition, the number of companies that received ISS opposition to SOP in two consecutive years declined, demonstrating that companies are getting better at addressing investor feedback.
These findings are worth considering if your say-on-pay resolution has gotten lower support than you’d like in recent years, and the memo goes into much greater detail on both. The notion of “conformity” also appears to align with another study that I blogged about last month.
– Liz Dunshee