Relationship Between CEO Pay Ratio and Say on Pay
Semler Brossy’s recent Say on Pay Report, Nine Additional Companies Fail Say on Pay, was cited in Davis Polk’s Corporate Governance Briefings.
A recent Semler Brossy report examining the relationship between 2018 CEO Pay Ratio and Say on Pay Results concluded that CEO Pay Ratio has an inverse relationship with Say on Pay but is not a primary driver of Say on Pay Results. With most companies now having filed their 2018 CEO Pay Ratios and reported Say on Pay vote results, the report covered 1,611 Russell 3000 and 364 S&P 500 companies.
It found that there was a weak, inverse relationship between CEO Pay Ratio and Say on Pay for Russell 3000 companies. Average Say on Pay support for Russell 3000 companies with a CEO Pay Ratio above the index’s median was 89.3% compared to 91.8% for those below the median. However, the 21% of Russell 3000 companies that had a ratio above 175:1 made up a disproportionate 46% of Say on Pay vote failures. The inverse relationship was stronger for the S&P 500, where average Say on Pay support was 87.0% for above-median companies compared to 91.6% for those below the median.
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