We are half-way through year two of say on pay and it seems institutional investors are voting for pay packages in a similar fashion to last year.
Yes, there have been some fireworks attached to a few significant no votes, such as Citigroup, but the pass and fail totals are about the same – more than 90 percent of pay plans are being approved.
‘It’s different companies that have failed, different companies getting low marks, and different companies getting high marks, but the numbers are really quite similar,’ says Ken Bertsch, president and CEO of the Society of Corporate Secretaries and Governance Professionals.
‘I think institutional investors to a significant degree really are deferring to management, except where they believe they’ve found things that are really wrong,’ reasons Bertsch, adding that the process seems to be working because it isn’t ‘overly intrusive’ and hasn’t engaged in ‘second-guessing on issues that don’t matter that much.’
‘I think that that’s not a bad way to implement say on pay,’ says Bertsch.
Let’s hope there’s another reason say on pay seems to be working out so well in this second year: that institutional investors are saying what they don’t like about pay in direct talks with corporate management and the board. More engagement with shareholders has led to more discussion about how pay packages are formulated; and typically when an issue is discussed widely in an industry, people begin to find norms that they can conform to.
So, while the 90 percent passing rate last year may have been due in large part to shareholders deferring to management, this year’s 90 percent pass rate could well be due in part to management listening to shareholders’ concerns and adjusting pay packages to better reflect actual performance. If this is in fact the case, then say on pay has indeed been a success.
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