The Advisors' Blog

– Liz Dunshee

This WSJ article says median CEO pay reached $13.7 million last year and is on track for a record. While a good number of investors seem to appreciate that retaining good leadership can be expensive, it’s looking like there are also quite a few who are unhappy with those statistics.

I shared predictions last month that these high payouts and investor attention to human capital issues were setting up companies for a difficult say-on-pay season. Here are observations from the latest weekly tracking memo from Semler Brossy (posted in our “Say-on-Pay” Practice Area):

– The current failure rate (4.8%) is nearly 4x higher than the failure rate at this time last year (1.3%); however, it is still early in the season and we will monitor whether the failure rate remains at an elevated level following annual meetings for the 12/31 FYE filers

– The average vote results of 88.9% for the Russell 3000 and 84.4% for the S&P 500 thus far in 2021 is well below the average vote results at this time last year

– Nearly all companies were challenged by the Covid-19 pandemic in 2020, and some responded by adjusting compensation design and magnitude; early proxy season vote results indicate shareholders are likely to hold companies that made changes to a high standard

On that last point, it also was reported just last week that proxy advisors are recommending “against” Say-on-Pay at one big company due to the decision to lower the CEO’s performance goals in the midst of a stock market dip, without adjusting the payout opportunity.