The following data and analysis is excerpted from Glass Lewis’ 2022 U.S. Proxy Season Review, available to clients in our Governance Hub library, or on Viewpoint.

  • The percentage of failed U.S. say-on-pay votes increased to 3% in 2022, 20% above the number of failed proposals in 2021. Moreover, the number of companies that passed with low support (50% to 75%) increased by 38% from 2021.
    • Despite the aforementioned figures, the average shareholder support rate decreased by only 0.1% compared to 2021. This may be attributable to increasing numbers of say-on-pay proposals year-over-year with numerous IPOs and SPAC-mergers in 2020 and 2021. Newly traded companies holding their first advisory vote on executive compensation will often have the support of insiders in control of large holdings in the company. Their votes inflate support levels and dilute the impact of disinterested shareholder votes.
  • Keeping in line with last year’s results, the most common driver for Glass Lewis against recommendations for say-on-pay in 2022 was excessive granting/compensation. These practices were prominent for 12 out of the 19 S&P 500 companies that failed this year.
    • Low voting support was relatively predicable given the substantial increase in one-time awards and their values. Indeed, 2022 saw the highest dollar values for transaction, discretionary, promotion, sign-on and retention awards over the last three years.
  • In 2022, E&S performance was included as part of the payout determination framework of short-term and/or long-term incentives for a majority of S&P 500 companies (61%) and Russell 1000 companies (52%), in all cases up from 2021.
    • While usage of E&S performance assessments continues to increase, the focus from shareholders is shifting toward disclosure of how E&S metrics are measured. This is particularly true for cases where performance has historically been determined on a largely subjective basis, particularly for human capital management and diversity.

Pace of granting history made a comeback into the top five list for Glass Lewis equity plan “against” recommendations in 2022. This likely reflects the excessive compensation and granting practices outlined above, but it could also have been impacted by decreasing stock prices during the pandemic, leading to the granting of more shares for the same amount of pay.

Keeping Up with the Joneses

Excessive granting practices continued to be the common denominator for many S&P 500 say-on-pay and equity plan failures, possibly driven by other companies granting significant awards, spiralling total pay. For most companies, excessive pay stemmed from one-time awards. JPMorgan, Booking Holdings, CenterPoint, Centene and CME Group granted substantial retention awards, promotion awards, severance benefits and/or employment agreement extension awards.  Global Payments saw its CEO’s total reported compensation 2022 increase approximately 50% from the previous year, partially due to one-time retention awards that pushed pay above the median of Glass Lewis peers.

ServiceNow and Penn National Gaming granted discretionary awards tied to stock price hurdles, and revenue or relative TSR, respectively. The value of these awards not only exceeded the median of their self-disclosed peer groups and Glass Lewis peers, but also more than doubled their CEOs’ regular pay levels.

Looking for More?

The data above is excerpted from Glass Lewis’ Proxy Season Reviews. Clients can access the full documents, including over 70 pages of charts, graphs and analysis for the U.S. market, via the Previews/Reviews tab in our Governance Hub library, or on Viewpoint.

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