Say on Pay

     The discussion on say on pay, a non-binding shareholder vote on executive compensation, was interesting. About half of those interviewed were against say-on-pay proposals for a variety of reasons, including that “the committee has better access to information than we do;” that such a plan may work for large investors but with dispersed ownership it would not; that they would prefer more engagement with directors; or that they would not know what firms would do in the event of a “no” vote. On the other hand, about one-quarter of organizations supported say on pay, with one noting that the threat of the vote could change firm behavior. Finally, the remaining organizations—about one-quarter—had a mixed or neutral view on the subject.

One issue that seemed quite clear in the study of investor responses is that they all have a common goal of earning money for their clients. It was also clear that most evaluate prospective firms for investment by considering a wide variety of factors, including (for many) executive compensation.

Although this issue is not studied in particular in this report, it may be the case that some of the strong views held by activist institutional investors are not generally held by the majority of or even very many of the largest institutional investors. A more in-depth analysis of the views of large institutional investors (perhaps with a formal structured survey) and an analysis of the differing views of activist investors and large investors is left for further study.