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Say-on-Pay Update: How Does 2012 Compare With 2011?
(The following post originally appeared on ONSecurities, a top Minnesota legal blog founded by Martin Rosenbaum to address securities, governance and compensation issues facing public companies.)
June 7, 2012
It’s June, and the crush of annual meetings is, for the most part, finished. For most companies, this has been the second year in which a Say-on-Pay vote – an advisory shareholder vote on the company’s executive compensation – has been required under the Dodd-Frank Act. This is a good time to look at the shareholder votes to see if there has been a major change from 2011.
Semler Brossy’s latest Say-on-Pay Results report (PDF) reveals that not much has changed from last year. For the vast majority of companies, Say-on-Pay has passed with a significant margin of victory. Like last year, most companies have received greater than 90% approval.
It does appear that there will be more failed Say-on-Pay votes this year than last year. Mark Borges, in his Proxy Disclosure Blog on CompensationStandards.com (subscription site) reports that 40 companies have failed to achieve a majority of affirmative votes this year, about the same number as all last year. Therefore, there will almost certainly be more negative votes in 2012 – but it’s unlikely that there will be a huge difference.
Of course, for some companies the results will be much different this year. For example, as reported in this previous post, Citigroup failed to get a majority positive vote this year, even though it won by a large margin last year. And Chiquita Brands International slipped on a banana peel this year – Borges reported that Chiquita got less than 20% Say-on-Pay support this year, compared to an 86% positive vote last year.
The 2012 proxy season so far teaches these lessons:
Don’t get cocky. As Citigroup’s experience demonstrates, a company can take nothing for granted, even if it did great on the vote in the previous year.
Supplemental proxies don’t seem to have a major impact. According to Semler Brossy, company responses to an “against” recommendation from ISS, filed in the form of supplemental proxy statements, do not appear to have a material impact on vote results. [On the other hand, they can’t hurt.]
Sue-on-Pay is still alive. As reported in this previous post, Citigroup was sued shortly after the negative Say-on-Pay was defeated, with claims based on the negative vote.
Engage, engage, engage. Continue to engage with major shareholders and proxy advisory firms about executive compensation issues before, during and after proxy season. The day after the 2012 annual meeting, it’s not to early to start planning for 2013.
