Say on Pay

Behind Say on Pay

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We offer insights into Say on Pay vote results, answering questions about what SOP data really means in our “Behind the Numbers” series and diving into the potential drivers of specific company vote results in our “Vote of the Week” reports.

Understanding the Impact of ISS’ Multiple of Median Test on Say on Pay Vote Support

Our weekly Say on Pay research consistently demonstrates that vote support is, on average, meaningfully lower (28%) when Institutional Shareholder Services (ISS) recommends “against” an issuer’s Say on Pay proposal. And, while ISS will conduct a thorough qualitative review before issuing an “against” recommendation, we know that ISS’ three quantitative tests are used as a preliminary screen to determine the level of qualitative scrutiny applied. Read more

Vote of the Week: Energy XXI

Our “Vote of the Week” features Energy XXI. A company with triennial Say on Pay votes, Energy XXI received 26% support in 2014 after receiving 90% support in 2011. The decreased support is likely due to increasing CEO pay opportunity and Committee determination of above-target annual incentive payouts during a period of mixed financial and market results, as well as above-median benchmarking practices and grants of long-term incentive and retention awards that are not rigorously performance-based. Read more

Behind the Numbers: What Can a Smaller Company do to Protect its Say on Pay Vote and Have Larger Vote Improvement?

In last year’s Behind the Numbers post titled “Are the Companies Failing Say on Pay in 2013 Smaller than Prior Years?”, we investigated whether companies that failed Say on Pay with less than 50% vote support were smaller than in prior years. We found that companies with revenue below $500MM were in fact failing at a higher rate. In this post, we further the analyses done last year to understand whether this observation holds true in 2014. Read more

Vote of the Week: Electronic Arts

Our “Vote of the Week” features Electronic Arts. Electronic Arts (EA) received 55% vote support in 2014 after receiving 93% support in 2013. The decreased support is likely due to a promotional $8.6MM stock option award granted to the CEO, adoption of a re-testing provision for annual PRSU grants, a decrease in the proportion of future equity grants subject to performance-based vesting conditions from 50% to 25%, and targeting the 75th percentile of peers when determining the value of annual equity grants. Read more

Votes of the Week: Guess? and Aéropostale

Our “Vote of the Week” features Guess? and Aéropostale. The two companies each failed in 2014 with Guess?, a triennial Say on Pay company, receiving 34% support in 2014 after receiving 68% support in 2011, and Aéropostale receiving 36% support in 2014 after receiving 99% support in 2013. Both companies recently entered into new employment agreements with their respective CEOs which provide for large equity awards despite negative long-term shareholder returns. These commonalities in pay and performance likely led to similar vote outcomes. Read more

Vote of the Week: Abercrombie & Fitch

Our “Vote of the Week” features Abercrombie & Fitch. Abercrombie received 96% vote support in 2014 after receiving 20% in 2013. Despite stock price underperformance, the increased vote support is likely due to a new employment agreement with CEO Michael Jeffries, a redesign of annual and long-term incentive plans, and increased use of performance-based equity with multi-year performance conditions. Read more

Vote of the Week: Time Warner Cable

Our “Vote of the Week” features Time Warner Cable. TWC received 62% vote support in 2014 after receiving 88% in 2013. The decreased vote support is likely due to acceleration of 2015 and 2016 LTI awards in 2014 to mitigate merger retention concerns, increased potential payments under a change-in-control, and supplementary 2014 bonus that provides up to an additional 50% of target with the completion of the merger. Read more

Vote of the Week: New York Community Bancorp

Our “Vote of the Week” features New York Community Bancorp. NYCB, a company with triennial Say on Pay votes, received 46% vote support in 2014 after receiving 83% in 2011. The decreased vote support is likely due to sizable and increasing tax gross-up payments made upon the vesting of equity awards, lack of clawback or stock-holding policies for executives, and use of identical performance goals in the annual and long-term incentive plans. Read more