February 28, 2020
In its 6th annual report, corporate activist As You Sow 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.
Attacks on shareholders: Historically, As You Sow has been 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.”
Proxy advisory firm reform: 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.
Why it matters: The annual As You Sow report, while essentially unchanged year to year as to overall tone and purpose, hits all the necessary high notes in the debate around income inequality and executive pay. To that end, it may be used by candidates on the campaign trail as well as to shame both companies and large investors on the topic of executive pay.