An easy blog for me today, as I simply incorporate an informative (albeit, concerning) post from fellow blogger Liz Dunshee on the increasing tendency of institutional investors to vote against company proposal and compensation committee members.
Two investor giants just released their annual stewardship reports, which give some trend insights on their pay-related votes & engagements. According to Vanguard’s report, they voted against 585 compensation committee members last year for failing to act in response to shareholder feedback. That feedback comes in large part from prior-year votes – but Vanguard also says it’s still discussing compensation in 45% of its engagements. See page 25 of the report for a few case studies that show what that engagement looks like.
Executive pay is continuing to get attention at BlackRock too – its report makes a big deal of the fact that say-on-pay support has jumped significantly at companies where it’s engaged on the topic of executive compensation.
But as they say in “South Park,” it’s not all “sunshine & sparkles” – page 15 says that BlackRock voted against 24% of small-cap equity plans (compared to 7% of Russell 3000 plans). Companies that fared poorly had evergreen & repricing provisions, unreasonable dilution, excessive one-off grants or lacked thorough disclosure about performance metrics. According to BlackRock, small companies need to step up their game on both governance & compensation policies to meet market best practices.
As if we don’t have enough to worry about for the upcoming proxy season.