Editor's Note: As noted in last week's Society Alert, the Society Alert is on hiatus this week during the Society's National Conference. In the interim, I am featuring noteworthy, recent Q&A (on an anonymous basis) from our invaluable Society Huddles.
Question: For our say-on-frequency vote this year, our board recommended an annual vote because we assumed that is the norm, and it is what we have been doing the past six years. However, our say-on-frequency vote has turned unusual in that more shareholders are voting for a 3-year vote frequency. I am curious if anyone else has had this situation, and if so, did your board go with what the shareholders voted for, or stay with their own recommendation?
This question generated a lot of activity and many excellent answers, including:
- At the advice of our outside attorney, we also asked the shareholders to vote annually on our say-on-frequency. Ironically enough, the shareholders voted for every three years. We continue to do this annually - but we are newly public and have only had two shareholder meetings.
- We held our annual meeting in early May, and we also recommended an annual vote. The vote came out as 91% for one year, 1% for two years and 8% for three years.
- We had our meeting in early May, and our board recommended an annual vote because we also thought that would be the preferred "norm" among our investors. The result was 80% for annual and 20% for three-years. We are 70% institutional-owned. It demonstrates that some investors have definitely shifted their position regardless of the board or proxy advisor recommendation.
- We held our annual meeting in early June, and we also recommended an annual vote. The shareholders came back with 83% for one year, a negligible amount for two years, and 16.5% for three years. It turns out there are a few institutional investors that favor the three-year vote, and that drove up that percentage.
- We had the same experience at the prior respondent. I know that BlackRock is a known proponent of three years for "say when on pay." If the majority of votes cast prefer three years, despite management's recommendation, I would think this is a data point you need to bring to your board for review and decision. While I know that much of the investor community supports a one-year frequency, apparently your shareholders do not agree. I would be concerned about potential withhold recommendations at the Nom/Gov committee or board level for ignoring a shareholder mandate, even on an advisory vote basis, for a three-year frequency.
See also some of our more recent Society Alert Say-on-Frequency reports: "Say-on-Frequency Vote Primer" in Proxy Season here, "Say-on-Pay Frequency Vote Recommendation Considerations" in Proxy Season here, and "Considerations for 2017 Say-on-Frequency Votes" here, and additional resources on our Say-on-Pay, 2017 Proxy Season, Annual Meeting, Shareholder Engagement, Institutional Investors, and Proxy Advisors topical pages.
Check out the Society Huddle!