Say-on-Pay 2023 - Results as of October 1st

In the world of corporate governance, Say-on-Pay (SOP) votes are a critical tool for shareholders to voice their views on executive compensation, and provide valuable insight into whether shareholders are aligned with the compensation practices of public companies. Recent data through October 1st illustrate some of the trends and outcomes of 2023 SOP, director nominee, and equity plan votes and the impact of ISS recommendations.

Across all U.S. indices, a total of 3,038 SOP proposals have been reviewed by ISS as of October 1st.

• 2,966 companies (≈98%) passed SOP with the requisite shareholder support and 61 companies (≈2%) failed SOP. Results are still pending for the remaining 11 companies.
• The companies that failed SOP received an average of 36% of the vote, compared to the average 91% received by those that passed.
• ISS recommended “For” 2,631 (≈87%) and “Against” 406 (≈13%) proposals. One proposal received a “Withhold” recommendation from ISS.
• Out of the total 406 ISS Against recommendations, 352 (≈87%) SOP proposals passed with shareholder support.
• Companies with an Against recommendation from ISS garnered an average of 70% of the shareholder vote, while those with ISS support received an average of 93% of the vote.

Director elections

• Out of a total of 18,066 director elections that have been put to a vote to date, less than 1% failed to receive the requisite vote support.
• In cases where director nominees did not receive the requisite support, such directors received an average of 44% of the vote, compared to the average 94% received by those that were elected.
• ISS recommended in favor of ≈85% and against ≈3% of the director elections (≈12% received abstain or withhold recommendations).
• Of the 491 director elections that ISS recommended against, 99% passed with shareholder support.
• Directors with an Against recommendation from ISS received an average of 84% of the shareholder vote, while those with ISS support received an average of 96% of the vote.

Equity plan proposals

• Out of a total of 1,007 equity plan proposals, only 14 (≈1%) failed thus far.
• ISS recommended in favor of 58% of the proposals.
• Of the 422 equity plan proposals that ISS recommended against, 97% passed with shareholder support to date (and five are still pending their shareholder vote).
• Equity plan proposals with an Against recommendation from ISS received an average of 79% of the shareholder vote, as opposed to those that received a favorable recommendation from ISS and an average of 90% support.

As demonstrated by the data, there is a notable willingness among shareholders to back companies that receive Against recommendations from ISS, suggesting that a nuanced understanding of the proposals and their alignment with shareholder interests plays a crucial role in these votes. Many companies are able to overcome a failed SOP with program improvements and shareholder outreach (for example, 82 companies that failed their SOP proposal in 2022 passed in 2023). However, some companies, although a fewer number, continue to be challenged in this regard (12 companies that failed SOP this year also failed in 2022). Executive compensation and corporate governance are expected to remain key focuses for investors and companies alike, and as such, SOP votes continue to be a symbolic expression of shareholder sentiment.

Madison Puhy
Consultant

Madison Puhy works with both public and private companies in a broad range of industries, including aerospace & defense, retail, financial services, and technology. She specializes in both executive and director pay benchmarking, as well as peer group development, executive compensation trends, and incentive plan design.