Investors and issuers vary on
Tim Human |
ISS survey shows two sides differ on how
boards should react to dissent over executive compensation
Investors and companies disagree on how boards
should react to say-on-pay dissent, according to the results of ISS’ annual
The study, which asks investors and issuers for feedback on governance
issues to help ISS in its policy formation process for the coming proxy
season, indicates executive compensation will be a flash point once again
during next year’s round of annual meetings.
participants were asked at what level opposition to a say-on-pay proposal
should trigger an explicit response from the board regarding improvements to
Of the US respondents, investors most commonly cited ‘more than 20 percent’
as the level at which a response should be forthcoming (36 percent picked
US corporations, on the other hand, selected ‘more than 50 percent’ as their
preference for when the board should issue a response (48 percent picked
Looking at the results on a cumulative basis, however, there is broad
agreement around the 30 percent-40 percent band between investors and
‘[On] a cumulative basis, 72 percent of investor respondents and 52 percent
of issuer respondents indicate that an explicit response from the board
regarding improvement to pay practices should be made at opposition levels
at more than 30 percent and more than 40 percent, respectively,’ states ISS
in a report on the survey’s findings.
Pay top concern in US
The survey points to yet more focus on pay at 2012’s annual meetings,
following a year in which US companies across the board had to hold advisory
votes on executive compensation for the first time.
This prediction is backed up by the survey finding that a majority of both
investors and issuers in the US view executive compensation as ‘one of the
top three governance topics’ for next year, as was the case in 2010’s
Investor focus does not necessarily translate into widespread action at
annual meetings, however. A study
by BNY Mellon Shareowner Services of its clients’ meetings from this year
finds the introduction of say-on-pay and say-when-on-pay votes – which
determine the frequency of say-on-pay votes – was largely a ‘non-event’.
Global focus on board independence
On a global basis, investors view board independence as a key focus for next
year’s proxy season, according to other results from ISS’ survey. ‘Across
every region, board independence is identified among the three most
important governance topics by approximately 40 percent of investor
respondents,’ states the report.
This is the eighth year ISS has sought feedback on corporate governance
issues in preparation for the coming proxy season. The study, which took
place between July 6 and August 26, called on ISS’ institutional clients and
corporate issuers to take part in an online survey.
This year, 138 institutions took part in the survey, with 63 percent based
in the US and the remainder split between Europe, Canada and Asia-Pacific. A
total of 197 issuers also responded to the survey, with 81 percent of them
located in the US and the rest from Europe or Canada.
Click here to download a full copy of the results.
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