Officials at the Florida State Board of Administration, Tallahassee, toughened their proxy-voting stand against compensation packages for CEOs and other top executives in the past year, while on proxy issues in general they raised their support for corporate boards and management.
According to its global proxy voting report issued in August, the FSBA, which oversees $165 billion, voted against management on 18.5% of 24,261 proposals at 2,876 U.S. companies in the 12 months ended June 30.
The votes against management were down slightly (from 19%) over the previous year.
On a global basis, the FSBA voted 18.2% against management in 89,060 proxy proposals at 9,820 companies in the year ended June 30. By contrast in the previous year, it voted 19.2% against management on a global basis.
The FSBA voted to support the election of 84% of 16,383 directors at 2,701 U.S. companies in the latest year, up from 82.7% in the previous year.
On a global basis, it voted 81.6% in favor of directors in the recent year, up from 80.4% the previous year.
In say-on-pay voting, the FSBA voted in support of the executive compensation of CEOs and other top executives at 77.1% of U.S. companies and 71.3% of global companies in the recent year. Those are down from 77.4% at both U.S. and global companies the previous year.
Michael P. McCauley, FSBA senior officer, investment programs and governance, said in an e-mailed response to questions, “We chalk up the differential in support to expected annual volatility in support levels, which normally deviate from year to year by several percentage points. Our most recent proxy-voting guidelines, implemented in early 2012, did not contain any material changes to our approach on voting.
“For U.S. companies, overall compensation practices incrementally improved with stronger ties to company performance and total shareholder returns ... Beginning in the (first quarter) of 2013, we fully integrated the pay-for-performance model offered by Farient Advisors (LLC, an executive compensation consulting firm) into the SBA's (say-on-pay) analysis ... This new model enhanced our existing analytics supplied by” Institutional Shareholder Services Inc and Glass Lewis & Co.”
Farient is not a proxy adviser; its analysis “is narrowly focused on (the) pay-for-performance relationship with compensation frameworks,” Mr. McCauley said in his e-mail. The Farient model “does a very good job evaluating the reasonableness of a firm's compensation structure over three-year time periods.”
Mr. McCauley said that “over the last year, many U.S. and foreign corporations have indeed improved their governance practices, including strong improvements in the number of U.S. companies moving toward annual elections” of directors, “making their long-term incentive plans more sensitive to company financial performance, and being much more proactive in their engagement and dialogue with investors.”
On the negative side, Mr. McCauley expressed disappointment with directors who remain on the board even after they fail to receive a majority level of support from shareholders in elections. n
