Looking back at the 2022 say-on-pay season, the main highlight is the record number of failures within the Russell 3000 since the vote on compensation programs became mandatory in 2011, while shareholder support was marginally lower than previous years at 89% (matching the lowest level of support recorded in 2012).
A record 86 say-on-pay failures were recorded in 2022, surpassing the 71 failures recorded in 2021 as the highest number of failures since the enactment of mandatory say on pay. Sixty of these failures were a first-time occurrence.
Mid-cap companies had the lowest number of failures in 2022, consistent with the lower-than-average failure rate for this group among all indexes during the past five years (2018 – 2022). Smaller companies within the Russell 3000 have been showing a spike in the number of failures; in 2022, 37% of all the failures came from this group. Larger S&P 500 companies have seen their numbers of failures go from single digits in 2018 and 2019 to the 20s in 2022.
The recent uncertain economic environment likely influenced the high number of failures in 2022. During the pandemic era, some companies lowered pay targets to address the challenging economic environment but did not revisit the changes post-pandemic. Other companies with high say-on-pay opposition issued retention awards that do not carry performance conditions in order to attract and retain talent in competitive job markets.
In order to avoid votes against pay programs, companies should align them to an ambitious and rigorous strategy to generate long-term value for investors. Companies should be proactive in terms of setting efficient pay programs, lead engagement and responsiveness strategies, and provide a clear and enhanced compensation discussion and analysis (CD&A) disclosure.
For a more detailed report summarizing our review of say on pay and key 2022 proxy season votes, including say on pay, say on golden parachutes and equity plan proposals, please download the PDF (below).
| Title | File Type | File Size |
|---|---|---|
| U.S Executive Pay Votes: 2022 season in review | 1.2 MB |
