Say-on-pay shareholder votes, in which a company’s stockholders have the chance to reject proposed compensation packages for top executives, if only in a nonbinding way, are tipping in management’s favor even more frequently in the early part of this year than they did in 2013.
According to a report produced by consulting firm Towers Watson and highlighted by The Wall Street Journal, 93 percent of the say-on-pay votes taken so far this year have passed, a slight increase over last year’s 90 percent. As the Journal notes, it is still early in the proxy season, with only 170 votes from companies listed in the Russell 3000 Index tallied to date.
Towers Watson also reported that Institutional Shareholder Services has shown more leniency toward companies this year in connection with such votes, recommending a no vote just 4 percent of the time, compared to last year’s 14 percent, compared with 14 percent in total last year, according to the Journal.
One possible explanation for the positive shareholder votes is that companies are getting better at explaining their compensation practices while also avoiding such sure-fire problems as not linking pay to performance, the Journal reports.
“Companies have adapted their pay programs for the say-on-pay world,” Robert Newbury, director of executive compensation research at Towers Watson, told the newspapers. “A lot of companies have addressed the low hanging fruit.”
So far, only one company in the Russell 3000, the Journal notes, health care diagnostic systems maker Hologic, failed to get a majority of support for its executive compensation plan. The company got just 34 percent support, down from 2013′s 65 percent.