Say-On-Pay votes aren’t always just a reflection of shareholders’ view of executive pay, but can also be an indirect way to measure whether shareholders are content with the CEO and company’s performance. In cases where a company’s stock is soaring — think Tesla (TSLA) until recently — shareholders are often happy to overlook what would otherwise seem like outsized pay packages as long as they too are being well paid via stock appreciation. Looking at early 2024 Say-On-Pay voting, we see a mix of both shareholder dissatisfaction with pure pay and those with broader concerns being mirrored in their Say-On-Pay vote.
In the table below, we list 25 companies that have 90% or less support from shareholders for the executive compensation plan put forward in their latest proxies and then voted on at this year’s annual meeting. In almost half the cases lower support on the say-on-pay vote is accompanied by lower support for directors (see the “Avg Vote FOR Directors” column) — a clear reflection of overall dissatisfaction with the company’s direction and performance. Not surprisingly, at these companies TSR tends to be poor and the average director ratings (more on Boardroom Alpha Director Ratings here) are low as well — both signs of company mismanagement leading to underperformance and, rightly, shareholder discontent.
In other instances, such as Lennar (LEN) or TransDigm Group (TDG), you’ll see companies that are performing well, but shareholders have concerns about the level of pay. In the case of TransDigm, CEO Kevin Stein received a 27% pay boost bringing him from to $23.85M up from $18.7M the year before. $20M of that is performance-based stock options that the company believes rewards executives for performance delivered and still ties them to long-term company performance. Almost 85% of TransDigm CEO pay is based on options which is significantly higher than their peers at 19%. Interestingly, in 2023 TransDigm brought in a new compensation consultant, Exequity, (they previously have used Meridian and Veritas) to provide fresh guidance on pay and how to meet shareholder interests.
Similar to Transdigm, Fair Isaac (FICO) saw CEO pay jump, but in this case from $18.9M to a whopping $66M, again driven by performance based awards. Compensia helped FICO, but shareholders were displeased with pay despite strong performance and only voted 58% FOR. They will have some serious work to do for 2024 if they want to bring pay inline with what shareholders expect to see.
Quick Reads
- Vanguard & Blackrock Should Vote “AGAINST” Directors at These April Shareholder Meetings
- Weekly Activism & Executive Moves Review (April 12)
- Weekly Activism & Executive Moves Review (April 5)
- Weekly Activism & Executive Moves Review (Mar 29)
- 2024 Activist Cooperation Agreements Through February
- 2023 Say-On-Pay Winners & Losers