Say on Pay

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The latest news, articles and reports on Say on Pay, including insights from Semler Brossy experts on trends and lessons learned from Say on Pay results.

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

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

Four more companies fail Say on Pay

Chesapeake Energy: 20% support in 2012 vs. 58% support in 2011. Shareholders also voted against one other compensation related proposal (approval of the annual incentive plan) and voted for a shareholder proposal relating to proxy access. Additionally, shareholders withheld a… Read more

Say on Pay fails and proxy access passes at Nabors

This week Nabors Industries became the 41st company to fail Say on Pay in 2012 and the fourth to fail two years in a row. Shareholders also voted against two other compensation related proposal on the agenda (approval of incentive bonus plan and approval of stock plan) as well as for a shareholder proposal to seek shareholder approval of future severance agreements (8-K filing here). In addition to the compensation proposals, shareholders also approved proxy access (article from Bloomberg), the first time a proxy access proposal has received majority support at a big company. The next edition of our weekly Say on Pay report will explore the reasons for the failed Say on Pay result in more detail. Read more

Report update: total failed votes at 40; three co’s have failed in 2011 and 2012

To date, 40 companies have failed Say on Pay - roughly 2.5% of companies, compared to 1.4% in 2011. This week, Tutor Perini became the third company to fail in both 2011 and 2012. This week’s Vote of the Week discusses Safety Insurance, the first company we are aware of to receive an ISS ‘for’ recommendation and fail Say on Pay. New additions to the list of failed companies since our report last Wednesday: Tutor Perini, Healthways Inc., United Online, and Digital River. Read more

Safety Insurance Group is first company to fail Say on Pay after receiving an ISS ‘For’ recommendation

Safety Insurance Group received 42% support for Say on Pay after receiving 67% in 2011. We believe this is the first company to fail Say on Pay despite receiving a For recommendation from ISS. Possible reasons for the low 2012 vote include: no specific description of the shareholder outreach process or findings following a relatively low vote in 2011, no meaningful change to pay program to address the 2011 vote or shareholder feedback, and negative TSR in 2011 driven in part by larger than usual underwriting losses due to extreme weather events during the year. (source: Semler Brossy analysis, ISS Governance Analytics). Read more

Vote of the Week: MDC Holdings support up 38% from 2011

MDC Holdings’ Say on Pay vote result increased 38%, from 34% to 72%, after failing in 2011. MDC Holdings made significant adjustments to its incentive programs and reduced CEO pay following its failed vote in 2011; however, proxy advisors expressed concern over some legacy pay elements. Read more