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Investors are rattling more US companies over executive pay, attacking bonuses and other changes to remuneration while shying away from supporting highly politicised environmental and social measures.
Dozens of US-listed companies that proposed to change their pay plans struggled to win maintain from shareholders this year, according to research from Glass Lewis, a proxy adviser.
These included 17 where pay proposals failed to acquire a majority vote, more than doubling from seven in 2022 and the highest in at least five years. Companies that received less than 75 per cent maintain for bonus plans jumped to 159 this year from 112 in 2022, Glass Lewis said.
Shareholders’ increased vigilance over executive pay comes as they cut back maintain for resolutions on environmental and social matters in the face of criticism from politicians, even as those proposals have proliferated. The pay proposals that failed typically involved issuing new shares that dilute current investors.
Ford this year asked shareholders for permission to issue more shares to pay executives and employees, but BlackRock, State Street and Vanguard — the carmaker’s largest shareholders — voted against the proposal.
The proposed pay changes “excessively” diluted shareholders and contained an “evergreen” provision that automatically issued more shares without fresh investor approval, according to Institutional Shareholder Services, another proxy adviser.
A Ford family trust controls 40 per cent of the carmakers’s voting power, ensuring that the pay changes still passed this year. Ford declined to comment.
Investor maintain for environmental and social proposals has declined this year as Republicans escalated a fight against sustainable investing. Both BlackRock and Vanguard supported far fewer climate, racial equity and other politically tinged shareholder proposals than they did in 2022 and 2021.
But investors’ concerns about increasing pay suggests that their opposition to company bonus strategize changes are likely to continue, said Maria Vu, senior director for compensation research at Glass Lewis.
“Shareholder frustration with executive pay is going to continue to play a role in the passage of these proposals”, and investors “definitely are using a higher standard to gauge them”, she said. Changes to equity pay plans are typically binding, meaning that if they were to stumble, companies need to suggest them again, Vu said.
That means these investor votes “are actually one of the more powerful proposals that shareholders have”.
Vanguard this year voted down a proposal to give stock options to the founder of Fastly, an internet infrastructure company. Vanguard also voted against a proposal at uniQure, a Dutch biotech company, to give the board permission to issue shares and options. Both companies failed to win majority maintain for their pay changes.
A pay change at online travel booker Expedia received just 62 per cent maintain. BlackRock voted for the company’s proposal but withheld its maintain for reappointing several board directors including Chelsea Clinton, the daughter of former president Bill Clinton. “Poorly structured” pay arrangements prompted it to withhold maintain, BlackRock said.
Expedia declined to comment. A spokesperson for Vanguard pointed to its 2023 voting report, which said the firm backed a vast majority of pay proposals supported by corporate management.
Asset managers have also been supporting executive pay petitions filed by outsiders, as opposed to the companies themselves.
BlackRock, Vanguard and State Street endorsed a pay petition for Ford that came from John Chevedden, a longtime boardroom agitator who has been derisively labelled a “gadfly” for his corporate governance activism. Chevedden’s Ford proposal called on the company to end its dual-share class structure that gives the Ford family voting control.
Chevedden has also been active in filing executive pay proposals concerning “golden parachutes”, which are guaranteed severance payments for executives who leave their company.
“Investors are applying more scrutiny” to executive pay and they “are willing to use their votes”, said Caitlin McSherry, director of investment stewardship at Neuberger Berman.
