Human Capital & Careers

Say on Pay Makes for More Proxy Tinkering

Few companies got negative say-on-pay votes this year, but many are planning changes to win even greater shareholder approval next year.
David McCannAugust 3, 2011

Less than 2% of U.S. public companies were hit with negative say-on-pay votes this year, the first year in which proxies were required to let shareholders say whether they approved of the compensation packages for top executives. Still, a vast majority of companies are planning or considering changes for next year’s proxy season designed to ensure further positive results, according to a new survey of 179 companies by consulting firm Towers Watson.

For 2011, commonly taken actions aimed at winning positive votes included reaching out to shareholders directly (56% of respondents), communicating with proxy advisers (53%), and hiring a proxy solicitor (40%). For next year, companies expect to pay more attention to their actual pay practices, with 91% of respondents planning or considering changes to their pay-setting processes or preparations (see chart).

That doesn’t necessarily mean companies will spend more time preparing the compensation portion of their proxy statements. Nearly three in four respondents (72%) plan to devote about the same amount of effort next year. However, among the 16% of companies that received “significant opposition” to their programs — i.e., less than 80% shareholder support and a negative recommendation on at least one executive’s compensation — 71% plan to make a greater effort next year, Towers Watson says.

“Most companies are breathing a sigh of relief now that the proxy season is over,” says Doug Friske, global head of Towers Watson’s executive compensation consulting practice. But the same can’t be said for the companies at the negative end of the opposition spectrum. “The survey findings . . . suggest that these companies are taking shareholder views quite seriously and plan to respond in some way.”