Investor support for "say on pay" has surged for a second consecutive year despite record-high CEO compensation levels, reflecting stronger alignment on executive pay practices in the U.S. and U.K.
NEW YORK--BUSINESS WIRE--
Investor backing for "say on pay" proposals rose to 91.5% at S&P 500 and Russell 3000 companies during the 2024 proxy season, according to the new Diligent Market Intelligence: Investor Stewardship 2024 report from Diligent. This comes as CEO compensation reached record levels, with the median granted pay for S&P 500 CEOs hitting $15.9 million in 2023-an 8.9% increase from the prior year-and $6.6 million for Russell 3000 CEOs, up 8.8%.
"The record levels of support we have observed reflect the work that has gone into disclosure and investor engagement," said Josh Black, editor-in-chief of Diligent Market Intelligence. "We also saw stock markets in the U.S. increase to deliver major gains in 2023 when compared to the negative returns that were recorded in 2022."
Support for management resolutions for "say on pay" at U.K.-listed companies has also increased, with the advisory votes securing a record 94.7% backing in the first nine months of this year, and CEO pay levels also reaching new heights as the region moves to narrow the pay gap with other major markets. CEO median granted pay increased by almost 6% at the FTSE 100 to 5 million pounds, while realized pay climbed by 4% to reach a median of 3.9 million pounds.
Three themes emerge from the report's key findings that both boards and investors should have on their radar:
Engagement and transparency are key in securing investor backing for pay plans.
- As pay plans are reviewed to reflect inflation, reward performance and retain talent, active and meaningful engagement as well as improved levels of disclosure will deliver increased levels of investor backing.
- There is now a greater focus on sustainable business practices and longtermism when investors engage with remuneration committees on increasing the total magnitude of pay, or replicating pay structures to more hybrid models.
Institutional investors increasingly use targeted votes against board committees to push for stronger governance.
- Support was lowest for nominating and governance committee chairs, averaging 92% at S&P 500 companies and 95.6% at FTSE 100 companies.
- Investors focused on these committees to drive diversity, board independence, and responsiveness to shareholder votes.
- Chairs of audit and compensation committees face less opposition, due to separate ballot items at annual meetings.
As environmental and social (E&S) shareholder proposals rise in the U.S. amid declining investor support, more companies are turning to the SEC's no-action process with growing success.
- A record 183 companies sought no-action relief this proxy season, up from 116 in 2023, often citing procedural defects or claims of micromanagement.
- The SEC granted 51% of these requests, compared to 47% last season and 29% in 2022, granting more relief to issuers.
- While support for E&S proposals declined, governance proposals have hit record investor support, averaging 77% in the Russell 3000 and 65% in the S&P 500.
