61 Russell 3000 companies failed Say on Pay votes in 2015

13 February 2016

Editor

EU regulation

Analysis of the proxy voting at Russell 3000 company meetings last year found that 61 companies (2.8%) failed in achieving at least 50% support for their say on pay votes which have been compulsory in the US since 2011, according to pay consultants Semler Brossy.

Looking at the number of companies that 'failed' their say on pay votes - which are not binding - there were 37 (1.4%), 57 in 2012 and 2013 (2.6% and 2.5% respectively)  and 60 (2.4%) in 2014.

Semler Brossy reported that of the companies that have had votes every year, most have passed Say on Pay all five years since it became mandatory.  Approximately 9% of companies have failed at least once. However, its data indicates that if a company fails once it is not likely to fail again.

The average vote result in 2015 was 91% according to Semler Brossy. Its analysis also found a trend emerging showing fewer companies are falling in the 70-90% range since 2011. The most common reasons for failing say on pay have remained the same over the past three years. These reasons are problematic pay practices, concerns about the relationship between the pay and performance of directors and non-performance based equity awards as well as lack of sufficient shareholder outreach and disclosure.

Semler Brossy also analysed equity plan proposal voting, which is binding. The firm found that on average, only 0.4% of equity plan proxy items have failed since 2011, compared to a 2.3% failure rate for Say on Pay proposals. Its findings also show that average vote support for equity plan proposals has increased 7% over the past five years and compared to 2011, nearly twice as many companies received equity plan support above 90% in 2015.

Golden parachute votes have fluctuated more and have been lower than Say on Pay votes every year since 2011, Semler Brossy found. In both 2012 and 2013, 25% of proposals received less than 70% support. In 2015 only 17% of proposals received less than 70% support.

Since 2013, Semler Brossy has also found that larger companies have improved their say on pay results while smaller ones are flat to slightly worse. Its report argues that larger companies may be better equipped to manage the Say on Pay vote and may place more attention on alignment with shareholder voting policies.

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