The Advisors' Blog

As Meredith noted last week, we’ve been seeing relatively strong say-on-pay support this year. Average say-on-pay support clocked in at 91% as of June 1st for S&P 500 companies, according to this FW Cook memo. But the memo explains why it’s important for compensation committees and their advisors to look beyond the numbers – for signals that could improve your fall engagements and potentially influence compensation decisions in the coming year. Here’s an excerpt:

Context determines what a result means more than the number itself. Modest erosion from a historically stable baseline reads differently than a fourth consecutive decline. A drop that would look manageable in isolation is more significant when it comes from long-supportive holders, or when the proxy advisor’s critique, shareholder feedback, and vote pattern all point to the- same issue.

Start by taking the vote apart before explaining it. Compare it to prior years. Determine whether opposition was concentrated or broad-based. Review how large holders appear to have voted and connect the result to any concerns heard during pre-meeting shareholder engagement. Low-90s support, and in some cases high-80s support, may not require action, but it may still warrant a closer read if opposition is concentrated, recurring, or tied to known concerns.

When it comes to using voting results to inform off-season engagements, the memo says:

Off-season engagement should start with the questions the Committee needs answered rather than starting with a promise of change.

Ain’t that the truth! The memo shares the types of questions that companies might want to ask depending on their circumstances.

– Liz Dunshee