ISS warns of follow-up activism
over executive pay
End-of-season roundup offers advice on which companies are most likely to be
targeted next year
US companies that
received more than 30 percent opposition to their pay proposals are likely
to face heightened scrutiny during the 2012 proxy season, warns
Institutional Shareholder Services (ISS) in its post-season report.
Shareholders have indicated that they expect to see ‘explicit action’ from
management once this threshold is crossed, writes the proxy adviser.
ISS data show 164 companies – or roughly 6 percent – out of the Russell 3000
Index experienced more than 30 percent opposition to their pay proposals and
therefore are at higher risk.
‘If… companies don’t adequately respond to this year’s say-on-pay votes,
investors may ramp up their protests, withhold support from more
compensation committee members in 2012 and vote ‘no’ during the advisory
vote,’ states ISS.
Changing their ways
The proxy adviser highlights two examples of companies that have made
significant revisions to executive compensation and seen shareholder support
Occidental Petroleum and KeyCorp both failed pay votes in 2010, but this
year won 91.3 percent and 86.7 percent support, respectively, after making
‘substantive changes,’ explains ISS.
‘Occidental… cut the CEO’s long-term incentive opportunities by 70 percent,
expanded the peer group used to benchmark pay, and reduced award
opportunities for other named executives,’ notes the report.
Broad support for management
The warning comes in ISS’ final roundup of the 2011 US proxy season, which
for the first time saw all US companies face an advisory vote on pay.
Overall, shareholders displayed strong support for management’s pay
proposals. The report finds that, on average, investors offer 92.1 percent
support in these votes.
As of September 1, just 38 companies in the Russell 3000 Index had been
defeated in say-on-pay votes.
Download the full 2011 US Post-Season Report.
© Copyright Cross Border Ltd. 1995–2011.