The NASPP Blog

If you’re feeling curious about how equity plan proposals are performing with shareholder votes, today’s blog has answers. Semler Brossy recently released their 2016 report on Trends in Equity Plan Proposals. Keep reading for some of the highlights.

Upward Trend in Failed Say-on-Pay Votes?

The number of companies each proxy cycle that have failed to obtain say-on-pay (“SOP”) approval from shareholders has remained fairly constant since SOP became mandatory 2011. This time last year, only two of the Russell 3,000 companies had failed their SOP vote. This year, that number has increased to five companies so far. Does this signify an uptick in SOP failures? It appears so, because the number of companies with failed votes so far in 2016 amounts to 3.5%, marking the first time more than 3% of Russell 3000 companies have failed at this time in the cycle to obtain an affirmative vote. Whether this is an anomaly year, or an indicator of a trend, time will tell.

Correlation Between Affirmative Say-on-Pay and Stock Plan Proposal Approvals

One correlation that appears to be rising is that companies who receive a pass Say-on-Pay vote also receive strong support for their equity plan proposals. Since SOP was adopted, the percentage of equity plan proposals that receive affirmative support relative to passing SOP votes has steadily increased (from 83% in 2011 to 90% in 2015). According to the Semler Brossy report,

Similarly, average vote support for equity plans at companies that receive an ISS ‘For’ recommendation has increased over time; this may suggest that ISS voting policies have become well-aligned with shareholder preferences

Companies that fail Say on Pay tend to have significantly lower support for their equity plan proposals, indicating that shareholders are assessing both proposals under similar lenses

A couple of final data points that seem to bring this all full circle are that ISS has recommended that shareholders vote “Against” Say-on-Pay at 10% of the companies it’s assessed so far in 2016, and, on top of that, shareholder support was 32% lower at companies with an ISS “Against” vote. This seems to suggest that companies looking for shareholder support in other areas, such as equity plan proposals, are more likely to gain shareholder support when ISS has recommended an affirmative Say-on-Pay vote. At minimum, there is an intertwining of all these factors and how they drive shareholder support.

For more interesting Say-on-Pay and equity plan proposal trends, view the full Semler Brossy report.

-Jenn