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How Say on Pay and Shareholder Rights Impact Corporate Governance

Dear Friend,

In this month’s Farient Comp & Gov Spotlight, we are focusing on Say on Pay and shareholder rights. In a recent evaluation of the results of Say on Pay votes over the past year, Farient found that about 2.6% Russell 3000 companies failed to obtain shareholder approval for executive compensation. While this is a small number overall, it represents a notable increase from prior years. This indicates that Say on Pay – 8 years after being mandated in the U.S. under the Dodd-Frank Act – is being increasingly used by shareholder activists to influence or stop the actions of corporate boards and management.

Say on Pay, however, is only one area of corporate governance that falls under the subject of shareholder rights. Other issues include proxy access, declassified boards, poison pills, single-class shares and majority-vote standards. According to the findings of the Global Governance and Executive Compensation Group’s (GECN’s) 2018 Global Trends in Corporate Governance report, on all these issues, the momentum is firmly with shareholder activists as they continue to gain more influence over decision-making. This has implications for corporate boards and management, as investors expect companies to have the shareholder rights mechanisms that are increasingly the global norm.

In keeping with this month’s theme, below you will find important stories relating to Say on Pay and shareholder rights. We hope the information and resources here are helpful to your company in evaluating its position and mechanisms on various shareholder rights issues.

Sincerely,

Dayna Harris, Partner, Farient Advisors

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Dayna Harris

Dayna Harris is a Partner with Farient Advisors and has over 20 years of experience providing advice on executive and board compensation. Ms. Harris’ experience includes advising boards and senior management of public and private companies across a variety of industries. For the past three years, Ms. Harris has been recognized by the NACD’s Directorship 100 honoring the most influential people in the boardroom.

Interesting Articles on the Power of Corporate Governance

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A Deep Dive on This Year's Say on Pay Results

 With an increase – from 1.4% to 2.6% - of Say on Pay votes failing this year for Russell 3000 companies, there has now been an increase every year since 2015. Clearly, proxy season 2018 is keeping investors vigilant regarding executive pay issues.

Learn more

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Shareholders Find Their Voice at Japan's Annual Meetings 

Following the updating of Japan’s corporate governance code in 2015, shareholder activism has been steadily increasing in a country where it was once rare. This past year, shareholder resolutions reached a record high and have increased 68% in the last five years.

Learn more

Hot off the Press from Farient 

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Agenda – Precautions and Pitfalls in M&A Pay Strategy

As mergers and acquisitions increase globally, board directors will have to pay closer attention to talent and culture in the M&A implementation process. In doing so, analysis and evaluation of companies’ compensation systems and how to configure them post-transaction is key to retaining top talent and mobilizing the organization.

Learn more

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Reuters – Outside Investors Rebuke Facebook Vote Structure, Tallies Show

A large majority of Facebook’s outside shareholders voted to curtail the “supervoting” rights of shares held by founder/CEO Mark Zuckerberg and a handful of other insiders. The measure, however, did not pass, demonstrating that Facebook lags on shareholder rights issues – and many of its investors are unhappy.

Learn more

Farient Pay Ratio Tracker
  

Farient Advisors LLC is an independent executive compensation, performance, and corporate governance consultancy. Farient provides a comprehensive array of services to boards of directors and management including: compensation program design, goal setting and performance measurement, pay and performance alignment, board of directors compensation, and shareholder communication among others. Farient has offices in Los Angeles and New York and covers clients in more than 30 countries through our partnership in the Global Governance Executive Compensation Group (GECN).

New York: 55 E. 59th Street Suite 12B New York NY 


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