Say on Pay

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Get comprehensive results in "Say on Pay Reports," in-depth analysis on Say on Pay results in our "Behind the Numbers" series, and insights on how companies are faring in "Vote of the Week."

Report update: Yahoo receives 50% support this proxy season

Total failures for the season now stand at 51 (or 2.7% versus 1% in 2011), with no new additions since our last report. We discuss Yahoo in our “Vote of the Week” – the company received 50% support (49.86% including abstentions as 'against' votes; 50.13% excluding abstentions as 'against' votes), which represents 20% less support this year. Yahoo's vote is likely attributable to continued concerns over company performance, coupled with concerns over severance payouts and changes made to compensation programs in 2011 and 2012. Read more

Report update: 51 total have failed SOP; Freeport McMoRan receives +22% support vs.2011

Total failures for the season now stand at 51 (or 2.7% versus 1% in 2011), with two new additions since last week (Best Buy and Kforce). We discuss Freeport McMoRan in our “Vote of the Week” – the company received 22% more vote support this year, following 46% support in 2011. The year over year increase in vote results is likely due to significant program changes. The company made modifications to its AIP program, reduced total compensation by 40% (as reported in the company's supplemental table), and made governance-related changes. Nonetheless, the company still received an ‘against’ recommendation from ISS given high absolute reported pay levels coupled with negative one?year TSR and other ongoing concerns. Read more

Two more Russell 3000 companies fail SOP; total now at 51

Two more companies – Best Buy and Kforce – have failed Say on Pay, bringing the total for the season to 51. According to CNBC, Best Buy failed Say on Pay after ISS “recommended that shareholders vote against the proposal primary due to the separation package paid to former CEO Brian Dunn.” Brian Dunn received a separation package valued around $5.5m, which included severance of $2.85m and continued vesting of restricted stock grants. Kforce received 39% support from shareholders this year after receiving 85% in 2011. ISS cited concerns with the company’s above-median benchmarking practices and acceleration of equity vesting following a cash sale that resulted in a pre-tax gain; disclosure was clear that the accelerated vesting was intended to offset a tax liability. Reported CEO pay also increased in a year when TSR was down 24%. Read more

A Move Towards Binding Say on Pay in Britain

The UK moved one step closer to requiring companies to hold a binding Say on Pay vote. Yesterday, Business Secretary Vince Cable presented a bill to Parliament that requires companies listed in Britain to hold binding Say on Pay votes at least once every three years and potentially more frequently if the pay program changes. The bill includes two types of Say on Pay votes: 1) Binding vote on prospective pay policy occurs at least once every three years or annually if the company changes its pay policy. Once approved, companies cannot make payments outside the scope of the policy without reapproval. 2) Nonbinding vote on how pay policy was implemented in the previous year, including actual amounts paid. If a company's advisory (non-binding) vote does not pass, the company is required to hold a binding vote on its pay policy the following year. The rules are expected to be approved by Parliament and become law by October 2013. The New York Times has more information and Gibson Dunn explains the details. Read more

Report update: 4 new companies fail since last week

With over 1,800 results collected, total failures for the season now stand at 49 (or 2.7% versus 1% in 2011). Four new companies announced failures this week: Abercrombie & Fitch, Cedar Realty Trust, Masimo Corp, and Sequenom Inc. We discuss Abercrombie & Fitch in more detail in our “Vote of the Week” – the Company received 25% vote support this year, following 56% support in 2011. The failed 2012 Say on Pay vote was likely the result of high absolute CEO pay levels and a year-over-year increase in reported CEO pay, coupled with continued proxy advisor and shareholder concerns over the CEO’s employment agreement and other pay elements. Despite high pay as reported in the proxy, the program is effectively set up with two hurdles to create any realizable value for the CEO. In total, there have been 106 responses to Say on Pay recommendations from proxy advisors; however, responses have slowed down, with only one new response filed this week (Marvell Technology Group Ltd). Of these responses, the majority focus on pay and performance relation, as well as other topics and peer group comparators. Read more

Abercrombie amends agreement with CEO post-Say on Pay

Abercrombie & Fitch announced in an 8-K today that it received 24.5% support for its proposal. In addition, Abercrombie announced that following negotiations, CEO Mr. Jeffries’ would forego the long-term incentive provision in his employment agreement that provides for semi-annual equity grants equal to 2.5% of TSR over six months – and the company would now make grants to the CEO during the normal cycle of annual grants to other executives. In the 8-K filing, Abercrombie also reiterated that in 2012, the Committee added performance share awards to the total mix of LTI awards for EVPs and that it is committed to enhancing its proxy disclosure and adding additional transparency regarding its decision-making process. Abercrombie also announced that it anticipates performance share awards will comprise an increased percentage of LTI awards in future years. Read the 8-K here. Read more

Abercrombie & Fitch fails Say on Pay after receiving 56% in 2011

According to the Columbus Dispatch, Abercrombie & Fitch announced at its annual meeting today that shareholders had voted against its executive pay programs, as shareholders “expressed displeasure with the company’s recent stock tumble.” The announcement follows 56% support for Say on Pay in 2011. Abercrombie is the 11th S&P 500 and 46th Russell 3000 company to fail this season. We will be reviewing the specifics of this vote in our “Vote of the Week” feature of our weekly Say on Pay report. Shareholders seemed to have remaining concerns over the high value of the CEO’s executive pay and the CEO’s employment agreement, which entitles the CEO to biannual LTI grants of 2.5% of total shareholder return over six-month periods. Under the agreement, the CEO received two grants of SARs last year – one in March with a grant date fair value (GDFV) of $35m and another in September with a GDFV of $8m – following respective periods of six-month TSR improvement. However, since September-end, the company’s stock price has declined over 50%. Read more

Behind the Numbers: Are shareholders targeting financial companies?

Our weekly Say on Pay report often raises interesting questions about what the data really mean. These questions are addressed in this series. Since the financial crisis, it seems like scrutiny of executive pay has been greater and shareholder sentiment has been more negative at financials compared to other industries. Interestingly, as of June 12, companies in the GICS Financial sector received some of the highest support of any industry. Read more