by Michael S. Melbinger
Winston & Strawn is an IMA member law firm…
Companies had seen a surge in shareholder proposals regarding executive compensation in the last few years. Indeed, we wrote about this issue as recently as November 2016. But there has been no such surge thus far in 2017.
Perhaps not surprisingly in these politicized times, shareholder proposals in 2017 have been directed at other issues thus far. Through May 31, 2017, 330 shareholder proposals had gone to a vote. Thus far, the most common proposals have involved climate change, the environment, and sustainability. Together with proposals requiring reports on lobbying payments and policies, political contributions, holy land principles, and gender diversity and equality proposals, these “political” proposals accounted for nearly one-half of the proposals so far. Proposals on executive compensation failed even to make the top ten.
When shareholders and their advisors first gained the right to vote “FOR” or “AGAINST” companies’ shareholder say on pay resolutions in 2011, shareholder proposals on executive compensation matters decreased significantly. However, the extremely high success rate of companies’ say on pay resolutions and the lack of response by some companies that failed to achieve a majority vote in favor of their say on pay resolutions led to a surge in shareholder proposals on compensation topics from only 39 in 2011 to more than 100 only two years later in 2013.
Another possible explanation is that most companies have by now addressed the issues most commonly raised by shareholders on executive compensation issues, which have been proposals to adopt a stock retention policy, adopt (or improve) a compensation clawback policy, and provide for pro-rata vesting of equity awards, rather than acceleration, upon a change in control. Few of the shareholder proposals on executive compensation matters succeeded in garnishing a majority vote. However, quite a few proposals were withdrawn only after the targeted company agreed to make changes.
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