Shareholder support for executive pay plans weakens

Weakened support for mid-, small- and micro-cap companies is symptomatic of escalating pressure boards face

While large-cap companies gain more support from their smaller counterparts, a new report revealed that shareholder endorsement of executive compensation plans has declined in 2014 at mid-cap, small-cap and micro-cap companies.

In an analysis of 2,788 shareholder meetings held between Jan. 1 and May 22, 2014, Broadridge and PwC found that say-on-pay proposals failed to receive majority support at 72 companies—compared to 54 companies in 2013.

The weakened support is symptomatic of the escalating pressure boards face around executive pay, according to Mary Ann Cloyd, leader of PwC’s Center for Board Governance.

“This trend points to the significant pressures boards still face around executive compensation,” Cloyd said in a statement.

While large-cap companies hold the majority of support for executive compensation plans—average support levels for executive compensation plans rose to 91 percent from 89 percent—a greater percentage of mid-cap and small-cap companies failed to attain at least 50 percent shareholder support, the report said. Furthermore, 5 percent of mid-cap companies failed to reach majority support so far in 2014, up from 2 percent in the 2013 proxy season.



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The analysis also found high levels of shareholder support for directors. Most directors received strong shareholder support, particularly at large-cap companies; however, 702 directors (4 percent of the number up for election) failed to achieve at least 70 percent support in 2014, which is a key threshold for some proxy advisory firms.

Analysts say that with options, as stock prices go up, so does pay for executives. The average compensation figure for the 200 highest-paid chief executives in the U.S. was $20 million, according to a report from executive compensation data firm Equilar.

In addition to new findings on executive pay, the report also revealed trends around technology and board declassification. Technologies to support virtual shareholder meetings have improved since their introduction five years ago, and the number of companies holding virtual meetings increased to 67 in 2013 from four in 2009. 

Trends around board declassification proposals show they continue to attain high levels of support when put to a shareholder vote, with an average of 96 percent of shares voting in favor regardless of company size.  


Editor in Chief

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Erin E. Harrison

Erin E. Harrison is the Editor in Chief of InsideCounsel magazine. Harrison’s professional background includes extensive expertise in both print and online media, highlighted by...

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