Georgeson's analysis of proxy disclosures for the 2019 proxy season for S&P 500 companies that received between 0% to 80% support for their say-on-pay in 2018 revealed a clear correlation between the inclusion of more robust disclosure about engagement practices in the 2019 proxy following a lower vote outcome in 2018, including a positive correlation between lower vote outcomes and disclosure of board engagement participation (i.e., signaling that the board is more likely to participate in engagements or the company is more likely to disclose board participation in lower say-on-pay vote scenarios), as shown here:
The in-depth analysis was focused on the nine companies that failed say-on-pay and the 34 companies (of the 468 S&P 500 that seek shareholder approval annually) that attained 50% - 80% support, less than 80% being Glass Lewis's shareholder opposition threshold (page 12) for company disclosure on compensation committee responsiveness to the vote. ISS's threshold (Q13) for company disclosure on compensation committee responsiveness to shareholder opposition on say-on-pay is a less than 70% standard.
Disclosure enhancements beyond "the basics" (i.e., some detail around the outreach and/or attendees involved in the engagement campaign and examples of feedback received from investors and/or steps taken in response to such feedback) and director involvement in the engagement process included visual enhancements in the form of charts or tables illustrating what was heard during outreach and what steps were taken in response, tables of contents that identified engagement-specific disclosure, and disclosure about engagement with proxy advisors.
The informative post includes examples of more robust disclosures and the number of "low vote" (i.e., less than 80% in this context) companies engaged by BlackRock, Vanguard, and State Street as revealed in the respective stewardship reports.
See our prior report: "How the Institutional Investors Voted on Directors & Say-on-Pay." Access numerous additional compensation-related shareholder engagement disclosure samples in Donnelley's "Guide to Effective Proxies" (reported on here), and additional resources on our Say-on-Pay, Proxy Season 2020, Proxy Season 2019, and Annual Meeting/Proxy Statement pages. This post first appeared in the weekly Society Alert!