Parsing The Vote: CEO Pay Characteristics Relative to Shareholder Dissent

Title:  Parsing The Vote:  CEO Pay Characteristics Relative to Shareholder Dissent

Publication Date: 8 March 2012  

Description:  With the advent of “say on pay” in the U.S. last year, much focus has been placed on the role of total shareholder return (TSR) in determining shareholder support or opposition to the non-binding management resolution. Yet, while TSR is widely seen as the most critical driver of votes, CEO pay magnitude also plays a role. In fact, when looking at both indices and sectors where a disproportionate number of companies saw less than 70 percent support for their say on pay resolution, we find that TSR alone likely cannot account for the high level of opposition, given performance in some cases was at or above median TSR levels for more highly supported peers.
Backing the assertion that pay magnitude resulted in higher levels of opposition during the inaugural year of say on pay, the analysis finds:

  • CEO pay disparities are stark when isolating for companies that received less than 70 percent on 2011 “say on pay” resolutions compared with those that saw support in excess of 95 percent. 
  • For example, average CEO bonuses for large capital, S&P 500 firms with low MSOP support stood at $3 million, compared with $1.1 million at higher supported peers. 
  • The value of “all-other-pay,” including perks and exit compensation, for CEOs at S&P 500 companies with low MSOP support was 138 percent greater than that for high support peers, while that for option grant values was 127 percent greater.
  • By industry, poorly supported Energy sector firms saw bonuses that were 664 percent that of their highly supported peers, and stock grants valued 338 percent greater.

To learn more about trends in the executive pay package mix, click here to download a complimentary copy of the paper "Parsing The Vote:  CEO Pay Characteristics Relative to Shareholder Dissent."