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27 March 2024 / Quick Take
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Copy LinkLow shareholder support for companies’ say-on-pay (SOP) proposals is translating into ever-lower support for the board’s compensation committee chair. In 2020, at companies where the SOP vote received less than 50% support (i.e., failed), compensation committee chairs received 89% support—6 percentage points lower than the 95% average support for all compensation committee chairs that year. By 2023, average support for these chairs dropped to 78%—15 percentage points lower than the average for all compensation committee chairs (93%).
Low shareholder support for companies’ say-on-pay (SOP) proposals is translating into ever-lower support for the board’s compensation committee chair. In 2020, at companies where the SOP vote received less than 50% support (i.e., failed), compensation committee chairs received 89% support—6 percentage points lower than the 95% average support for all compensation committee chairs that year. By 2023, average support for these chairs dropped to 78%—15 percentage points lower than the average for all compensation committee chairs (93%).
Major institutional investors are increasingly coupling concerns about executive compensation packages with votes against compensation committee chairs and members. This is especially true for companies with multiple years of failed SOP votes. At such companies, support for compensation committee chairs has averaged 63% since 2020.
The good news is that most companies take action to address a failed SOP vote. On average, companies with a failed SOP vote in Year One receive 70-78% support for their SOP proposal in Year Two. This, in turn, is reflected in improved—albeit still below-average—support for compensation
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