Seventy-four percent of companies achieved at least 90% of the shareholder vote in support of their executive compensation practices, up from 73% in all of last year, according to a Towers Watson report, based on voting results of 1,452 companies in the Russell 3000 stock index reporting through May 23 this year.
The average shareholder vote was 90% in favor of ratifying the executive pay, based on a sum of the voting percentage at each of the companies. That number was the same as for all of last year.
So far this year, 32, or 2.2%, of the companies failed to get a majority vote in support of their non-binding say-on-pay voting, about the same percentage as last year when 58, or 1.9%, of Russell 3000 companies failed to win majority support.
“The 2% seems to be solidifying itself,” said James Kroll, Towers Watson director who leads its executive compensation governance advisory practice, in an interview, noting the figure was 2% in 2013 and 2011 and 3% in 2012. “A minority of companies really run into concerns in say-on-pay votes. It's not very widespread that companies have difficulties in their votes.”
In regard to the overall high level of support, Mr. Kroll said, “I'm not very surprised by it. … The area that gets a lot of scrutiny is pay for performance,” which is the biggest concern of shareholders. “But from a (total shareholder return) perspective, the market did well last year. So it's not surprising to me this year we aren't seeing any aberration in the vote outcomes.”
“We see greater use of pay that is linked to performance overall,” Mr. Kroll said in a follow-up e-mail. “Sometimes those links are linked directly to (total shareholder return) and other times companies use financial and other metrics that are linked to company strategy.”
“We are seeing greater transparency” in disclosures to shareholders and more engagement between companies and their shareholders.” Mr. Kroll said in the e-mail. “This can help shareholders better understand a company's pay practices and decisions.”
