As You Sow Releases Annual CEO Pay Report, Further Escalating Pressure on Large Investors to Vote Against Pay

February 17, 2017

In its third annual report, corporate social responsibility group As You Sow blasted the executive pay packages at S&P 500 companies and called for even more scrutiny on the executive pay votes of large institutional investors, citing a doubling of large fund groups which have voted against at least 30 percent of compensation packages the group has considered "overpaid" since the report's inception.  The annual report, this year titled "The 100 Most Overpaid CEOS:  Are Fund Managers Asleep at the Wheel?" closely mirrors last year's report, identifying the 100 most "overpaid" CEOs out of the S&P 500, some of which are noted to have been ranked in the top 25 for two or three consecutive years.  More interestingly, however, the report has amplified its criticism of mainstream institutional investors for their approval of the executive compensation at companies the As You Sow report deems as being "overpaid" in what the report characterizes as approval of the "the misallocation of corporate assets."  While the criticism is notable with specific funds being called out, the report notes that this year the average support for the "overpaid" CEOs identified by As You Sow declined from 82 to 76 percent among the largest fund groups.  The use of public pressure directed against mainstream investors for their support of executive pay packages at companies is beginning to emerge as a more mainstream tactic of social activists, and is an extension of successful pressure being placed on mutual funds to incorporate ESG measures in evaluating both whether to invest in companies and how they vote company proxies.  Meanwhile, the trend of mainstream investor scrutiny of executive pay appears to be spreading with major funds in the United Kingdom announcing their intention to increase scrutiny on executive pay both in the UK as well as the US.  According to the Financial Times, the populist political climate has impacted investors making income inequality and high pay more noticeable.  As a result, the FT reports that major funds, including Blackrock, State Street Global Advisors and Fidelity International, are poised to give extra scrutiny to executive compensation in what the publication predicts could be a rocky annual meeting season.