Executive Compensation News and Views 3Q 2014 | Newsletters

Executive Compensation News and Views - 3Q 2014

Real Estate & Infrastructure

August 25, 2014

2014 Say-on-Pay Results

After a couple of years of decreasing support for REIT compensation programs, in 2014 the level of shareholder concern over executive pay practices remained relatively flat over 2013 levels. The key highlights from the 4th annual Say-on-Pay (SOP) vote include the following:

  • One Less Failed REIT – In 2014, 5 REITS failed their SOP proposals, down from 6 REITs in 2013.
  • Slight Increase in Overall SOP Support – In 2014, 90.5% of shareholders in the aggregate voted in favor of REIT SOP proposals, which represents a slight increase from 89.8% in 2013.
  • Fewer REITs Fall Below the 70% Threshold – ISS has designated 70% as the threshold to signal a need to engage with shareholders to better understand their concerns with the company’s executive compensation program. In 2013, 19 REITs fell below the 70% threshold and in 2014 that number decreased to 16 companies.

SOP Results in General Industry

Based on ISS Voting Analytics, the results of the overall SOP vote for the Russell 3000 were fairly consistent with the results in the REIT industry, with the following key highlights:

  • Average support levels were approximately 91%.
  • 53 companies or approximately 2.4% of the Russell 3000 failed to receive majority support.
  • Of the 53 companies that failed, 11 companies failed 2 years in a row, 1 company failed 3 years in a row and 2 companies have failed all 4 votes.
  • 92% of companies have passed SOP all four years.
  • ISS issued “Against” voting recommendations for 13% of companies.

Effects of ISS Recommendations on REIT SOP Results

ISS and other proxy advisory firms have a meaningful influence on SOP voting outcomes. Key highlights of ISS’ influence on 2013 SOP results include:

  • This year ISS issued 21 “Against” voting recommendations for REITs, of which 24% of those companies ultimately failed their SOP vote.

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