2020 Proxy Season Review Part 2—Say-on-Pay Votes and Equity Compensation

Sullivan & Cromwell LLP - July 22, 2020
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  • Public companies continued to perform strongly, with support levels averaging 91% and less than 2% of companies failing
  • Continued turn-over in failed votes, with 56% of companies that failed last year achieving over 70% support this year and only five companies failing in both 2019 and 2020
  • ISS negative recommendations highlight the continued importance of the pay-for-performance assessment, with the most important factor continuing to be the alignment of CEO pay with relative total shareholder return
  • The most important qualitative factors were performance standards that were not deemed sufficiently rigorous or were not clearly explained, followed by severance or change-in-control arrangements deemed not in the shareholders’ interests and the use of time-based awards rather than performance-based awards
Equity Compensation Plans:
  • Broad shareholder support for equity compensation plans, with only three Russell 3000 companies failing to obtain shareholder approval for an equity compensation plan, and overall support levels continuing to average around 93%
Our annual proxy season review memo summarizes significant developments relating to the 2020 U.S. annual meeting proxy season. This year, our review comprises three parts: Rule 14a-8 shareholder proposals; compensation-related matters; and takeaways for 2021. This is Part 2.  Part 1, which focuses on Rule 14a-8 shareholder proposals, was published on July 15, 2020 and is available here. We expect to issue Part 3 shortly.  We will also host our annual webinar to discuss 2020 proxy season developments in September.