2021 Say on Pay & Proxy Results

Todd Sirras is Managing Director, Justin Beck is Consultant, and Austin Vanbastelaer is Senior Consultant at Semler Brossy LLP. This post is based on a Semler Brossy memorandum by Mr. Sirras, Mr. Beck, Mr. Vanbastelaer, Alexandria Agee, Sarah Hartman, and Kyle McCarthy. Related research from the Program on Corporate Governance includes the book Pay without Performance: The Unfulfilled Promise of Executive Compensation, and Executive Compensation as an Agency Problem, both by Lucian Bebchuk and Jesse Fried.

2021 Say on Pay Results

Breakdown of Say on Pay Vote Results

22 Russell 3000 companies (3.3%) failed Say on Pay thus far in 2021. 14 companies failed since our last report and are highlighted in bold on page 3 of this report. Our evaluation of the likely reasons for failure indicates that four of the twenty-two failed Say on Pay votes are due in part to Covid-19 related actions.

Say on Pay Observations

  • The current failure rate (3.3%) is well above the failure rate at this time last year (1.9%), but an overall decline from our 4/29 report failure rate of (4.2%)
  • The 90.8% average vote results for the Russell 3000 and 88.4% for the S&P 500 thus far in 2021 are below the average vote results at this time last year; however, the percentage of Russell 3000 companies receiving greater than 90% (79%) is greater than the percentage at this time last year (78%)
  • The average Russell 3000 vote results thus far are 240 basis points higher than the S&P 500 which is 140 basis points higher than the spread at this time last year

Data provided by ESGAUGE and Semler Brossy; analysis by Semler Brossy. Russell 3000 sample as of July 1, 2020; S&P 500 sample as of March 22, 2021.

ISS Impact on Say on Pay Vote Results

  • The current average Say on Pay vote result for companies that received an ISS “Against” recommendation is 36 percentage points lower than for companies that received an ISS “For” recommendation
  • The 36-percentage point gap is above the historical average range of 24 to 32 percentage points; ISS “For” rate is consistent with the rate at this time last year
  • Shareholders have tended to be more critical when casting votes for companies that received an ISS “Against” recommendation

Data provided by ESGAUGE and Semler Brossy; analysis by Semler Brossy. Russell 3000 sample as of July 1, 2020; S&P 500 sample as of March 22, 2021.

Likely Causes of Say on Pay Votes Under 50% in 2020

2021 E&S Proposal Results

  • Thus far in the proxy season, shareholders have voted on 44 social proposals and six environmental proposals; the number of proposals thus far in the proxy season is significantly higher than the number of proposals observed at this time last year
  • Median support for social proposals is 33% and median support for environmental proposals is 59%; we have observed significantly higher support (often above 70%) for proposals that request reporting on EEO-1 statistics, diversity and inclusion efforts, Board diversity, lobbying payments, and certain environmental-related topics
  • Nine social proposals (21%) and three environmental proposals (50%) have received greater than 50% support in 2020; this is much higher than the 9% of social proposals and 16% of environmental proposals that received greater than 50% support in 2020

Spotlight: Paycom Software

Shareholders submitted a proposal requesting that Paycom publish a report on the diversity of the company’s Management team.

The proposal passed with 75% vote support

  • The proponents of the proposal requested to see disclosure around hiring, promotion, and
    retention rates of women and minorities
  • The proponents noted that the management team has no women and an undeterminable number of people of color, and cited research that indicates greater diversity of senior leadership is correlated with stronger performance
  • The Board did not take a position “For” or “Against’ the proposal, but reaffirmed its commitment to diversity and inclusion throughout the hiring, development, and retention process, and referenced high level workforce statistics
  • ISS recommended “For” the proposal and cited that the data referenced by the company is not sufficiently robust to allow shareholders to understand the effectiveness of the company’s diversity and inclusion policies, and noted that an assessment of diversity as well as disclosure of diversity targets would be of value to shareholders

The complete publication is available here.

Both comments and trackbacks are currently closed.