Are Top Investors Listening to Proxy Advisors on Pay?

Large investors are not following the recommendations on executive compensation set out by Proxy Voting Advisers (“PVA”), a study by data company Proxy Insight has found.

Proxy Insight analyzed voting on Advisory Say on Pay (“SoP”) resolutions in the US and UK in 2015 and 2016 for 10 of the largest institutional investors and compared each vote to the recommendations from ISS and Glass Lewis. While voting by top investors correlated with ISS 90% of the time and Glass Lewis 83% of the time for all SoP resolutions, the link is drastically reduced for votes where ISS and/or Glass Lewis recommend against a SoP proposal.

In aggregate, the 10 investors matched ISS on only 51.4% of recommendations to vote against management on SoP in 2016, and 29.5% of Glass Lewis’. In each case, the level of opposition was sharply reduced compared to the year before.

The picture is even more noteworthy when both ISS and Glass Lewis recommended voting Against management. Since 2015, the top investors only voted Against 61.8% of SoP resolutions where both ISS and Glass Lewis recommended against.

Commenting on the analysis, Proxy Insight Managing Director, Nick Dawson remarked: “Not only does the data provide a more realistic measure of the influence of Proxy Advisors, which is often overblown, but it also suggests increasing reluctance from investors to oppose management on the perennial issue of compensation.”

The breakdown for the 10 investors is as follows:

Note: ISS recommendations are synthetic, created by Proxy Insight based on a proprietary methodology. The Glass Lewis recommendations have been provided directly from Glass Lewis themselves.