This report provides the full year of results for 2013, covering over 2,200 companies in the Russell 3000. The majority of companies continued to pass Say on Pay in 2013 with substantial shareholder support: approximately 91% of companies passed with over 70% shareholder approval. Since our last update, seven additional companies announced failures (Capstone Turbine, Corinthian Colleges, DFC Global, Fusion-io, Masmio, Oracle, and SWS Group). Total failures for 2013 stand at 57 (2.5% of Russell 3000 companies), notably the same number of Russell 3000 companies that failed in 2012.
We will begin to issue Say on Pay updates for the 2014 proxy season in March 2014.
In our “Vote of the Week,” we discuss WebMD which received 60% vote support in 2013 after receiving 71% and 90% in 2012 and 2011. The decreased support is attributable to high CEO pay during a period of lagging company performance, significant executive turnover with high sign-on and severance payments, discretionary cash bonuses, and problematic pay practices.
November 18, 2013
LookSmart, an $11.65M online advertising company, recently became the first company to receive 0% support for Say on Pay, after its Board of Directors recommended voting “against” the Say on Pay proposal. The Board recommended against its own proposal, reasoning in the proxy that “The current directors of the Company and the current compensation committee members believe that the executive compensation and the related practices of the former directors and former executive officers were ineffective and inappropriate and that the former directors and former executive officers consistently awarded themselves excessive compensation without regard to performance or what was in the best interests of the stockholders.”
All of the Company’s directors and executives were “terminated for cause, removed for cause, or ceased to hold office with the Company” in January 2013. The turnover was related to a tender offer takeover by PEEK Investments.
Despite the Board’s recommendation, the Company received support from proxy advisors. Investors chose to follow the Board’s recommendation -- all 9 million+ votes were “against.”
We collected results for 81 more companies since our last report, bringing the total to 2,039 for the season. This week, we found two more companies that failed Say on Pay, bringing our total to 50 (McKesson and Helen of Troy). Year-over-year, results are roughly flat; companies that failed in 2012 have received significantly more support in 2013 (on average, +39%).
In our “Vote of the Week,” we discuss McKesson Corporation which received 22% vote support in 2013 after receiving 62% and 70% support in 2012 and 2011. The decreased support is attributable to a 30% increase in reported year over year CEO pay, continued proxy advisor and shareholder concerns over the CEO’s pension balance (valued at $159m upon voluntary termination) and duplicative performance measures in the short and long term incentive plans underscoring general concerns over the rigor of performance targets.