Risk & Compliance

Shareholder ‘No’ Votes on Directors Rise

Equity holders also appear to be increasingly dissatisfied with executive compensation plans.
Matthew HellerMarch 23, 2015
Shareholder ‘No’ Votes on Directors Rise

Shareholder support for directors and say-on-pay proposals declined in the second half of 2014, according to a new report that shows 344 directors of U.S. public companies failed to win the support of at least 70% of shares voted.

Broadridge Financial Solutions and PwC’s Center for Board Governance found that 125 directors at 45 different companies fell short of majority shareholder approval during the 2014 fall proxy “mini-season,” up from 99 directors at 53 companies in 2013. The survey analyzed data from 1,077 public company shareholder meetings held between July 1, 2014, and  Dec. 31, 2014.

“The 70% ‘support’ benchmark is important to many companies and proxy advisors,” Chuck Callan, senior vice president of regulatory affairs at Broadridge, said in a news release.

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The data also indicated that low director support is a recurring problem for some companies. One-third of the companies that had a director fail to attain majority support in the 2013 mini-season also had a director fail to obtain majority support in 2014, and 46 companies have now failed to surpass the 70% affirmative threshold for two straight mini-seasons.

On “say-on-pay,” out of 471 companies that had a shareholder vote on their executive compensation plans, 35 failed to attain majority support while the average level of support for pay plans fell to 80% — from 83% last mini-season.

Declines in “say-on- pay” support levels were pronounced at large-cap companies. Whereas in the 2013 mini-season, only one large cap company failed to achieve at least 70% support for say-on-pay, six (17%) fell short of that threshold last year.

Thirty of the 35 companies that failed to win majority support for their plan also had a director election this season. Almost half of those firms had a director who failed to attain at least 70% shareholder support.

Required under Dodd-Frank, say-on-pay votes are nonbinding. However, many companies revamp pay packages after shareholder votes show displeasure with current compensation schemes.

Image: Thinkstock