Shareholders' rejection of Citigroup's executive compensation plan last month garnered lots of press, but for the most part investors are giving pay packages a thumbs up this year, in line with last year's results.
Statistics from HR consulting company Towers Watson show companies have averaged support of 89% in the close to 900 say-on-pay votes conducted so far this year, little changed from average support of 90% in 2011.
"You look at our summary and you see a lot of consistency that doesn't look too different from last year," says Jim Kroll, senior consultant at Towers Watson. "But the failures are consistent as well. A meaningful number of companies failed last year, and in percentage terms we're tracking along those lines."
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So far in 2012, about 2% of companies have garnered less than 50% support for their executive compensation program, in line with the 1.6% of companies with failed votes last year.
Kroll notes some "slight differences in the patterns." For example, the Towers Watson data show just 44% of companies won support of 95% or more this year, down from 50% last year.
"I think some of the leading shareholders refined their approach after last year," he says. "They were thoughtful last year, but I think they're being even more thoughtful and digging deeper."
The data indicate that a negative recommendation by proxy advisor Institutional Shareholder Services can have a big impact. Towers Watson says ISS has recommended voting against the pay package at 12% of Russell 3000 companies. While companies with a positive recommendation from ISS averaged 93% support, when ISS recommended a no vote, companies averaged just 64% shareholder support.
Kroll points out, though, that no votes aren't necessarily a reflection of the ISS recommendation, but could show that big shareholders independently reached the same conclusion as ISS.
"We've had some conversations with shareholders that lead us to believe that there are some large shareholders out there that are reaching similar conclusions to ISS," he says. "We know some shareholders simply don't follow ISS blindly."
For more on Citi's pay vote, see Citi Shareholders Reject Pay Plan. For an article about litigation related to failed pay votes, see Failed Say-on-Pay Votes Spur Lawsuits.
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Susan Kelly
Susan Kelly is a business journalist who has written for Treasury & Risk, FierceCFO, Global Finance, Financial Week, Bridge News and The Bond Buyer.
