Say on Pay Tempers Shareholder Proposals for A Second Year

June 15, 2012

Although the number of shareholder resolutions filed so far in 2012 is up slightly from 2011—primarily due to political and lobbying spending proposals—the say on pay vote continues to be the preferred mechanism for sending shareholder messages to companies.  According to the Manhattan Institute’s database, as of May 21, 160 Fortune 200 companies had held their annual meetings, and the number of shareholder proposals received per company increased from 1.4 in all of 2011 to 1.5 so far in 2012.  However, that compares to 1.8 in 2006.  Shareholder proposals related to executive compensation have decreased appreciably in the last two years as say on pay eliminated the need for shareholders to file resolutions seeking say on pay votes, and shareholders chose to focus on the say on pay vote rather than submit more specific-related compensation proposals.  
The 2012 proxy season has seen an increased number of shareholder proposals seeking greater disclosure of political and lobbying spending, rising from 14% in 2010 to 30 percent this year.  However, while political and lobbying spending resolutions are appearing with increased frequency, the average shareholder support for the proposals actually has seen a year-over-year decrease, from 21.9 percent in 2011 to 19.8 percent today, and none of these resolutions has received over 40 percent support.  
The same tepid response is also present in governance-focused resolutions.  For example, among Fortune 200 companies, the number of shareholder proposals asking companies to separate the CEO and Chairman positions rose significantly over the 2010 and 2011 levels, but the resolutions have averaged an increase in support of just two percent over 2011.  It remains to be seen whether activist investors will return to submitting executive compensation and other shareholder resolutions as say on pay votes become more routine, or whether investors are seemingly content to use say on pay as a general outlet while referring occasionally to more targeted resolutions.