August 23, 2019

Agenda – Getting at the ‘Root’ of Rising Say-on-Pay Opposition

By Lindsay Frost

More companies are seeing say-on-pay results dip into the 50% to 90% range as opposition to executive compensation continues to grow, data shows.

Accordingly, compensation com­mittees are increasingly engaging with shareholders one-on-one about their concerns as their voting policies take a more crafted, hardline approach, sources say.

“Large institutional investors are becoming increasingly indep­endent from proxy advisory firms and use their own criteria to evaluate compensation practices while making say-on-pay decisions in-house,” says Noah Kaplan, managing director and head of the San Francisco office at compensation consultant F.W. Cook & Co. “When you have increasingly divergent opinions among shareholders in terms of what constitutes appropriate pay practices, it becomes more challenging to have a program that checks the box for most companies.”

Meanwhile, though a generally healthy economy caused pay to jump last year, next year could be different as some economists are forecasting weakness or uncertainty ahead. A potential recession next year could impact compensation, and sources say compensation committees need to keep the lines of communication with investors open and prepare for intensified scrutiny over pay plans if stock prices decline.

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