Shareholder Support for Say-on-Pay Wanes Slightly in 2016

Small, Large Capital Companies Closing Gap in Support Levels

ROCKVILLE, Md. (July 15 2016)  – ISS Corporate Solutions, Inc., a leading provider of compensation and governance tools and advisory services to help companies improve shareholder value and reduce risk, today announced findings of an analysis of shareholder voting on advisory pay resolutions during the 2016 U.S. annual meeting season.

For the first time in six years of say-on-pay voting, S&P 500 companies and smaller companies included in the Russell 3000 have nearly identical aggregate voting outcomes on this ballot item.  While median vote outcomes have been within a percentage point between the two groups over the past three years, the percentage of outliers has varied among the two groups in past years.  This year, those outliers – companies with failed say-on-pay votes, and companies with less than 70 percent shareholder support – has nearly equalized.

An analysis of Voting Analytics data finds slightly lower median shareholder support on the issue for large capitalization companies compared with smaller firms in 2016. Across 416 S&P500 companies with annual meetings between January 1 and June 30, 2016, and for which say-on-pay vote results are available as of July 15, median support stood at 95.2 percent, 0.7 and 1.0 points below the same periods in 2015 and 2014, respectively. More telling, however, is the percentage of S&P500 companies that received a low vote, defined as less than 70 percent support of votes cast “for” and “against,” which grew from 4.8 and 4.6 percent in 2014 and 2015 respectively to 6.3 percent this year. The number of say-on-pay votes failing to pass at large market capitalization companies ticked up in 2016, moreover, growing to five of 416 S&P500 companies analyzed and compared with two of 416 companies during the same period in 2015 and four of 438 in 2014.

Smaller companies, including those in the Russell 3,000 below the S&P500, also fared slightly worse on say-on-pay votes in 2016 compared with previous periods. Among that universe of 1,448 firms, median support fell, albeit just by basis points to 96.1 percent. However, votes failing to pass were far fewer in 2016 than over the last two years, representing just 1.6 percent of all votes compared with 2.6 percent in 2015 and 2014. The percentage of resolutions garnering less than 70 percent support also dropped across the smaller company universe by more than a percentage point to 6.4 percent in 2016.

“Shareholder-friendly executive compensation packages are becoming more common among smaller companies, leading to fewer of them receiving low levels of support compared to previous years,” said John Roe, Managing Director and Head of Advisory at ISS Corporate Solutions. “At the same time, large companies are facing increasingly sophisticated investors who are able to spot issues and nuances in pay packages much better than ever before.”