June 27, 2013
An op-ed this week Jesse Eisinger from ProPublica in the New York Times' Dealbook Section, dubs say on pay a miserable bust for failing to shift “social norms” on executive compensation citing "Fidel Castro-like" election results which shareholder "fall over themselves to approve," but Center research on changes companies made in 2013 following receiving low votes in 2012 disproves his theory. The op-ed explains Mr. Eisinger's discontent with the lack of change resulting from say on pay citing an increase in CEO pay coupled with both a decrease in company failures and the increase of companies receiving over 90% shareholder support as evidence of its claim. The author argues that large companies deserve greater scrutiny because executives are just "caretakers of established institutions" and "[typically] have displayed neither vision nor entrepreneurialism but an ability to rise through a bureaucracy without offending anyone." The op-ed blames several entities for the problem including the government for failing to make say on pay binding, plaintiff's attorneys for "whiffing" at challenging pay decisions and boards of directors and shareholders for lack of diligent oversight. Mr. Eisinger is particularly critical of shareholders, and he states that "putting shareholders in charge of enforcing social norms is like having Lindsay Lohan advise Miley Cyrus on temperance."
Lacking in Mr. Eisinger's diatribe is any acknowledgement that many, if not most, companies receiving lower levels of approvals have made significant changes. The Center has cataloged the disclosures of 33 S&P 500 companies that received less than 75% support for their say on pay vote in 2012, and the disclosures they made in 2013 regarding shareholder engagement and changes in executive compensation design and disclosure. We have attached the disclosures for 10 of those companies that we found particularly instructive. Most companies engaged with shareholders representing 40-60% of shares outstanding, many made changes to strengthen the alignment of long-term incentive metrics with strategy and long-term investor returns, increasing performance-based pay and making adjustments to peer groups. In sum, the responses of companies that for which say on pay was approved in 2012, but for whom the votes were low makes it clear that companies are listening to their shareholders and that say on pay has had an impact.
The Center's research is attached.