A new report issued by GMI Ratings warns that nearly 200 companies, including 42 S&P 500 firms, may be at risk of receiving say on pay ‘No’ votes in 2012.
GMI says that in addition to the 38 companies that received failed say on pay votes in 2011, another 157 companies in the Russell 3000 failed to receive at least 70 percent of shareholder support for their compensation plans. The report warns that ‘a more than 30 percent against vote suggests a substantial number of shareholders disapprove of these companies’ pay practices. If these corporations do not actively engage shareholders and reconcile policy concerns, they are putting themselves at risk for a vote failure next year.’
The companies identified as having the lowest support for their compensation plans include Safeway, Pfizer, Abercrombie & Fitch, Allstate and Adobe Systems. (For full list, see table below.) The report says that these companies ‘have several critical compensation policy issues’ and urges companies to make meaningful policy change before 2012 voting takes place. Companies that barely received passing grades should also review their compensation policies and find more acceptable rationales for paying discretionary bonuses, mega stock grants and severance awards that are not closely tied to company performance.
‘Winning only a nominal majority of support by shareholders should not be seen by corporations as a ringing endorsement – it’s more a case of scraping by,’ said Greg Ruel, research associate at GMI, in a statement. ‘Receiving less than 70 percent support on executive pay packages is an indication of a significant level of dissatisfaction with the way compensation is being handled at the company.’
‘It will require active involvement with shareholders and significant policy changes at these companies in order to avoid being at risk for vote failure next year,’ Ruel says.
Company name and support for proposal (%)
Safeway: 52.81
CONSOL Energy: 55.20
Pfizer: 55.40
Allegheny Technologies: 55.43
Invesco: 55.62
Abercrombie & Fitch: 55.89
Devon Energy: 56.79
Allstate Corporation: 57.04
Chesapeake Energy: 57.88
Adobe Systems: 58.14
Source: GMI Ratings
