In its Sixth annual report, corporate activist As You Sow’s once again blasted executive pay packages at S&P 500 companies and criticized large institutional investors such as BlackRock for failing to vote against “excessive pay.”
Behind the Sound Bites. As You Sow takes a somewhat arbitrary approach to determining the most “overpaid” CEOs, using statistical regression to compute what CEO pay “should be” based on five-year TSR, ranking companies by say on pay vote, and then ranking again by CEO pay ratio to arrive at the final list.
Focus on Large Institutional Investors. As You Sow has been historically extremely critical of large institutional investors, claiming that pension funds and European investors are carrying the battle against “excess CEO pay” while large financial fund managers such as BlackRock, State Street and Vanguard vote with management. Calling pay-for-performance “a myth,” As You Sow attributes sustained low Say on Pay failure rates to these investors’ “hard to understand” support, further claiming that shareholder votes have simply failed to keep up with “broader attitudes toward executive pay.”
Critical of Proxy ADvisory Firm Regulation -- and ISS? Unsurprisingly, As You Sow opposes the SEC’s proposed rules to regulate proxy advisory firm business models. However, in keeping with the activist’s criticisms of large investors, the report stops short of praising ISS and in fact calls out its low rate of “against” recommendations (typically around 11% each year) versus what As You Sow would like to see.
