2019 Say-On-Pay Recap | FTI Consulting

2019 Say-On-Pay Recap

Shareholders find their own voice

Corporate Finance & Restructuring

September 10, 2019

boardroom

Key 2019 Say-On-Pay Highlights

  • Russell 3000 Say-on-Pay Results Improve Slightly: While shareholder support and say-on-pay results stayed effectively flat, Russell 3000 companies saw a decline in negative voting recommendations from Institutional Shareholder Services, or ISS (274 “against“ recommendations in 2019 vs. 303 in 2018) but only a slight reduction in the number of failed proposals (50 failed companies in 2019 vs. 53 in 2018). Overall, Russell 3000 companies averaged 90.67% support in both 2018 and 2019.
  • More Active Shareholder Voting: Institutional investors are becoming less reliant on the voting recommendations of proxy advisors and performing their own due diligence and research on executive pay matters, signaling to companies the need for active engagement with shareholders and meticulous compensation disclosure.
  • Problematic Severance Provisions Continue to Drive Negative Voting Recommendations: Companies that have a “low” concern under the pay-for-performance model almost always receive a favorable voting recommendation from ISS (the most influential of the proxy advisory firms). The main exception relates to companies that renew employment contracts without modifying previously grandfathered “problematic” provisions, such as excise tax gross-ups or “excessive” severance provisions.

2019 vs. 2018 Say-On-Pay Results

While overall say-on-pay support stayed effectively consistent across industries, the companies in the Russell 3000 had a slight decrease in the number of failed companies, despite relatively consistent voting recommendations from ISS:

  • The number of companies in the Russell 3000 that received negative ISS voting recommendations decreased almost 1%. The communication services industry received the highest percentage of say-on-pay proposal “against” recommendations from ISS in both 2018 and 2019.
  • The consumer staples and utilities industries received the lowest percentage of say-on-pay proposal “against” recommendations from ISS in 2018 and 2019, respectively.

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