Investor Dissatisfaction on Executive Pay Continues to Rise This Proxy Season

June 27, 2022

With more investors voting “no” on Say on Pay (SOP) than ever before…

The number of large-cap companies that have received votes of 70 percent or below is on track to be the largest since SOP was implemented in 2011. In this Farient Brief, Eric Hoffmann analyzes the state of SOP this proxy season. Hoffmann, who leads Farient Information Services and the Data Analytics Team (DAT), has more than 25 years of technology and data analytics experience in executive compensation. Hoffmann dives into the data to tell a story of increased investor revolt over pay – and provides key action steps for boards to address investor concerns to avoid a high-profile SOP failure in the future.


Executive Summary:

  • Investors are voting “no” on Say on Pay in greater numbers than ever before
  • Midway through the 2022 proxy season, some 34 large-cap companies in the S&P 500 have seen SOP votes of less than 70%. Among the lowest vote-getters were Apple, JP Morgan Chase, and Intel
  • The percentage of companies that received less than 90% support for their SOP increased from 17.9% in 2018 to 30.2% this year
  • The number of large-cap companies that so far have received SOP votes of 70 percent or below is on track to be the largest number since SOP was implemented in 2011

Every picture tells a story. This year, Say on Pay votes reveal growing shareholder dissatisfaction with executive compensation. At the peak of the 2022 poxy season, a higher number of corporations in the S&P 500 received votes of less than 70%.


S&P 500 Companies Receiving Less Than 70% SOP Support

(through 6/7/2022*)

*Results from 367 companies reporting results for 2022


“Historically, it is unusual for companies to receive less than 90% support on these votes, so less than 70% support is reflective of significant investor dissatisfaction. We have now seen consecutive years of decreasing support for SOP in the S&P 500,” says Eric Hoffmann, leader of Farient Advisors’ Data Analytics Team (DAT). So far, 34 of the 367 S&P 500 have reported less than 70% support for their executive compensation programs and 11 have received less than majority support.

A sampling of the 34 companies that received SOP votes of less than 70% support, as well as the reasons investors voted no, include:

  • Retention or one-time special equity grants
  • A lack of alignment between pay and performance
  • Excessive pay relative to peers

Beginning in 2011, as mandated under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the U.S. Securities and Exchange Commission incorporated rules that required SOP votes for public companies.

Hoffmann says that boards face the challenge of retaining executives in an increasingly competitive job market. Among the examples are the size of executive awards and paying out special awards. These actions have always drawn the ire of investors. What’s different is the growing percentage of investors who are voting “no.” Some boards appear willing to take a one-year decline in SOP support to “do what they believe they have to do” to keep their executive teams together, Hoffmann says. Although the data is preliminary, it appears that Institutional Shareholder Services (ISS), the most influential of the proxy advisors, has made AGAINST recommendations at an estimated record rate of 14% of companies this year, up from 11.5% in 2021.


Why Investors Voted No on Say On Pay

An early analysis of this year’s proxy season shows that poor SOP votes stemmed from a variety of reasons, mostly due to a lack of alignment around pay and performance. Today, the stock market retreats toward bear territory and inflation hovers at around 8%. It appears increasingly difficult for companies and their boards to justify some of these big CEO paydays—routine fodder for headlines.

A sampling of the 34 companies that received less than 70% SOP support, as well as the reasons investors voted no, include:

Say on Pay SOP Voting



Takeaways for Compensation Committees

  • Recognizing that the demands of hot talent markets and the quest for good governance are on a collision course, compensation committees still need to consider balanced approaches, particularly to special awards. Rules of thumb include:
    • Exclude CEOs from special award programs
    • Require performance conditions for earning awards
    • Keep awards at reasonable levels
    • Be crystal clear as to the rationale for the awards
    • State that such awards are intended to be a one-time or infrequent occurrence
  • If the company receives a poor SOP vote, the compensation committee should consider how to cure the root causes of the vote and proactively engage with investors on planned changes
  • The credo for boards and compensation committees should be “absolutely no surprises.” Investors hate surprises, including one-time mega grants, retention grants, excessive pay, and poor pay-for-performance outcomes. While not all actions can be telegraphed in advance, companies should proactively engage with investors and disclose key changes whenever possible (e.g., discuss anticipated changes with investors before final decisions are made, disclose forward-looking strategies and changes, rather than simply historical ones)


Related Say on Pay Content


The Farient Say on Pay Tracker monitors and aggregates Say on Pay results, providing a summary of SOP votes with easy-to-access and easy-to-read tables that contain all companies with SOP votes of <50% and 50-80%.


In The News: Financial Times – US investors rebel against high executive pay

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