U.S. Say on Pay Votes for Shareholders 

  • 2018.09.25  CalPERS, Executive Compensation, and ... Elizabeth Taylor!  These three may seem like strange bedfellows, but the nexus comes from this truism about executive compensation: shareholder outrage erupts in down markets, and evaporates during booms. Witness for example the efforts of CalPERS to awaken some pay-for-performance alignment. For the years 2011 through 2017, CalPERS is reported to have voted "no" for say-on-pay about 16% of the time. In 2018, that "no" vote percentage leapt to 43% with CalPERS explaining that this was primarily due to a misalignment between executive pay and corporate performance.  Meanwhile, the "up" market has found 95% shareholder support for companies with "for" recommendations, and 73% for companies passing with an “against” recommendation (per a 12/2017 FW Cook report).  All of this brings to mind Elizabeth Taylor's quote: "there is no deodorant like success."  As year-end 2018 approaches, the best boards will heed the call to better align pay-to-performance.  Otherwise, they will be vulnerable when a stall in the stock market makes their executive compensation plans fail the smell test.

Applicable Law 

  • Section 14A(a)(1) of the Exchange Act (Section 951 of the Dodd-Frank Act).
  • SEC Final Say on Pay Rules (aka Rule 14a-21)- for Say on Pay (released 1/25/2011; published in the Federal Register 2011.Feb.2).
  • SEC Press Release re final rules.
  • CD&Is by SEC re Say on Pay - released 2/11/2011.
  • 2012.Feb.14  SEC re Say on Pay Proposal Text for Voting Cards and Instructions.  The SEC has issued guidance about how proxy cards and voting instructions should describe the say-on-pay vote. The top four bullets provide examples of approved language, and the bullet in the last line illustrates an inadequate description (because of its ambiguity).   See CD&I 169.07. 

Topics relating to Say on Pay

Voting Results on Say on Pay