Early Say on Pay Report Finds Two Equity Plan Failures Already

Although the overall Say on Pay failure rate for 2023 is significantly lower than this time last year (.7% versus 2.1%), support for equity plans has fallen from 91.1% to 86.8%, with two failures already, according to Semler Brossy’s first 2023 Say on Pay report. Highlights from the report include:

• Say on Pay Results. Support for Russell 3000 companies is higher than last year (92.2% versus 89.2%); S&P 500 support is lower than the Russell 3000, but still slightly higher than last year (88.8% versus 87.2%). However, there have only been 34 S&P 500 votes so it’s early days. Only one company has failed Say on Pay so far in 2023: PriceSmart.
  
  
• ISS Recommendations. ISS “Against” rates are lower than last year, with only 5.2% of the Russell 3000 receiving an “Against” so far. For companies that do receive an “Against,” the average spread is a 19% reduction in Say on Pay support.
  
  
• Shareholder Proposals. Only 10 E&S proposals have been voted on so far, and one has passed – the NYC Comptroller’s proposal requesting an independent third party worker rights assessment received 52% shareholder support at Starbucks. The Comptroller has also filed proposals at other large companies to initiate audits or to adopt a noninterference policy to uphold workers’ freedom of association and collective bargaining rights.
  
  
• Equity Proposal Results. As noted above, average support for equity plans is down, and two companies failed – United Natural Foods and Compass Minerals. Last year there were no failures at all, and the maximum is usually 2-3 per year, so to have two already by April is unusual. ISS recommended against both companies’ equity plans; details will likely be forthcoming, but ISS’s usual practice is to recommend against for factors like discretionary vesting acceleration authority, excessive plan cost or high burn rate.