With shareholders having more say on this issue than ever before, companies have been forced to reevaluate and in some cases overhaul existing executive pay schemes in response to external pressure. Based on interviews with 25 corporate counsel, corporate secretaries, and heads of investor relations at North American firms, Toppan Merrill’s Market Pulse: Executive Compensation examines the ways in which companies are seeking to navigate this changing landscape.
To find out how the executive compensation landscape is evolving, Toppan Merrill commissioned Mergermarket to survey corporate respondents in North American firms for their insights.
Say on Pay regulations, which require shareholder approval of executive compensation as well as “golden parachute” arrangements, have understandably lead to increased shareholder pressure since their establishment under Dodd-Frank in 2011. Nearly three-quarters of respondents say the rule has ignited a moderate (44%) or significant (28%) increase in pressure from investors to change executive compensation at their company.
However, Say on Pay experiences vary widely for individual companies. While the large majority of S&P 500 companies see executive compensation packages approved by over 90% of shareholders, according to data analyzed by Equilar for The Associated Press, approval ratings at many large-scale conglomerates have been far from unanimous.
Compensation packages for GE and AIG were approved by 70% and 55% of shareholders, respectively, after leadership changes and stock performance shook investors’ faith in leadership in 2018.
In an even more extreme example, 52% of Disney shareholders voted against the company’s proposed executive compensation packages that year, causing Disney to cut CEO Robert Iger’s annual earnings by $13.5m and raise the bar on the performance goals Iger would need to meet in order to earn his full bonus by 2021. After those changes were agreed to, Disney’s pay packages were still only approved by a 57% majority.