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pay & governanceS&P 500 say-on-payfailures increaseThe number of S&P 500 companies whose executive pay plans failed toreceive majority support from shareholders is up compared to last year.Nine S&P 500 companies have failed say on pay as of May29, which exceeds the total number of seven for all of 2019and each of the prior years except 2012. In the past, S&P500 companies have enjoyed more say-on-pay supportthan smaller companies, but this may be changing.Reasons for failures. Reasons some investors cited forvoting against say on pay at the nine S&P 500 companyfailures, aggregated by Proxy Insight, were driven by payfor-performance disconnects, including:No other surprises despite pandemic. Executive paydecisions for 2019 predated the market gyrations broughton by the COVID-19 pandemic and say-on-pay vote resultshave been generally unaffected. Most indicators ofshareholder support remain strong so far and consistentwith prior years: Out of 1,729 all-size companies reporting results, 43 (2.5%)have received less than 50% support, a higher rate than47 out of about 2,100 (2.2%) as of June 12, 2019 Modification of performance targets to make them easierto achieve Votes continue to average about 91% in favor ofcompanies’ executive pay programs Lack of quantifiable (vs qualitative) performance metrics Favorable votes of 90% or higher at individual companiesare similar to last year (down slightly from 77% in 2019 to76% in 2020 for S&P 500 companies, and up slightly from73% to 75% for all companies) Lack of transparency around performance goals, lack ofgoal rigor, and/or use of discretion One-off equity grants, especially when not sufficientlyperformance-based Mega grants covering current and future years Payment of cash severance on retirement in lieu offorfeited equity ISS has recommended shareholders vote against fewersay-on-pay proposals (10% so far this year compared with13% as of June 12, 2019 and 14% for all of 2019)
S&P 500 say-on-pay failures increaseLooking aheadThe reasons for the say-on-pay failures indicate areas of concern investors are likely to focus on whenthey next vote on say on pay, including actions companies take to address the volatile market and globalpandemic. Companies with June 30 fiscal year ends will be the first to see the impact, and should engagewith shareholders and ensure their proxy disclosure explains the rationale for pay decisions. See Managingincentives during uncertain times for a discussion of 2020 compensation decisions in response to COVID-19and Proxy advisers weigh in on COVID-19’s impact on pay and governance.EXHIBITS1. Say-on-pay summary results: % in favor, 2011 to 20202. Companies with 2020 say-on-pay failures and 2019 results3. Companies with 2019 say-on-pay failures and 2020 results4. ISS influence on vote results, 2011 to 20205. Number of companies failed say-on-pay at least once since 2011EXHIBIT 1Say-on-pay summary results, 2011 to 2020 (as of May 29, 2020)“All-Size Companies” is all companies followed by ISS where SOP vote results have been reported in US proxies.2011-2017 vote results are reported as a % of total votes in favor plus votes against, not including abstentions or brokernon-votes. 2018-2020 vote results are based on how companies compute and report their percentages, which maycount abstentions and/or broker non-votes as “against”.2
S&P 500 say-on-pay failures increase3EXHIBIT 2Companies with 2020 say-on-pay failures and prior-year results (as of May 29, 2020)Votes “for” the following companies’ say-on-pay (SOP) proposals came to less than 50% (as indicated byshading) of total votes cast in 2020. Percentages shown are based on how companies compute and report theirvote results, which may count abstentions and/or broker non-votes as “against.”CompaniesAcuity Brands, Inc.Altria Group, Inc. *Assertio Therapeutics, Inc.Associated Banc-CorpBunge LimitedCassava Sciences, Inc.CIM Commercial Trust CorporationCleveland-Cliffs, Inc.Colony Capital, Inc.CryoPort, Inc.CVS Health Corporation *Daseke, Inc.Digimarc CorporationEverbridge, Inc.Federal Realty Investment Trust *Fidelity National Information Services, Inc. *FreightCar America, Inc.Home BancShares, Inc.Intel Corporation *Investors Bancorp, Inc.IQVIA Holdings, Inc. *Kilroy Realty CorporationLaredo Petroleum, Inc.Mallinckrodt PlcMedpace Holdings, Inc.National Holdings CorporationNoble Corp. PlcNXP Semiconductors NVPaycom Software, Inc. *Penns Woods Bancorp, Inc.QUALCOMM Incorporated *SPAR Group, Inc.SS&C Technologies Holdings, Inc.Tandem Diabetes Care, Inc.Titan Pharmaceuticals, Inc.Tribune Publishing CompanyTutor Perini CorporationU.S. Silica Holdings, Inc.USA Technologies, Inc.Vector Group Ltd.Vornado Realty Trust *Westwood Holdings Group, Inc.Zovio, Inc.Total failures:Average change (for companies with data for both years)* Company is included in S&P 500 Index.1Company failed despite ISS “for” CSLCAUSATVGRVNOWHGZVO% in %95.0%-49.1%65.3%64.3%--
S&P 500 say-on-pay failures increase4EXHIBIT 3Companies with 2019 say-on-pay failures and 2020 results (as of May 29, 2020)Votes “for” the following companies’ say-on-pay (SOP) proposals came to less than 50% (as indicated byshading) of total votes cast in 2019. Percentages shown are based on how companies compute and report theirvote results, which may count abstentions and/or broker non-votes as “against.”Support in 2020 following 2019 failureCompanies2U, Inc.Accuray IncorporatedAdamis PharmaceuticalsCorporationAdvaxis, Inc.AGCO Corp.Align Technology, Inc. *Alkermes PlcAmerican Outdoor BrandsCorporationAmeriprise Financial, Inc. *Applied Optoelectronics, Inc.ASGN, Inc.Aspen Technology, Inc.At Home Group, Inc.Avaya Holdings Corp.Boston Beer Co., Inc.CenturyLink, Inc. *Citizens, Inc. (Austin, Texas)CUI Global, Inc.Diebold Nixdorf, Inc.Digimarc Corp.Ennis, Inc.FleetCor Technologies, Inc. *Frontier Communications Corp.FuelCell Energy, Inc.Gannett Co., Inc.HC2 Holdings, Inc.Hercules Capital, Inc.IMAX Corp.ImmunoGen, Inc.iStar, Inc.Kilroy Realty Corp.TickerTWOUARAYADMP% in favor20202019-38.3%-10.5%-27.2%CompaniesMotorcar Parts of America, Inc.Nabors Industries Ltd.NCR Corp.TickerMPAANBRNCR% in 0%Netflix, Inc. *Nexstar Media Group, Inc.Nuance Communications, Inc.Palo Alto Networks, Inc.PeerStream, 92.9%31.3%-74.0%91.0%33.9% 118.2%41.7%27.4%47.2%39.6%41.1% 119.1%35.3%38.3%44.7%4.6% redictive Oncology, Inc.Proofpoint, Inc.PTC, Inc.Puma Biotechnology, Inc.QEP Resources, Inc.Rayonier Advanced Materials, Inc.Real Goods Solar, Inc.SandRidge Energy, Inc.ServiceSource International, Inc.Signature BankSouth Jersey Industries, Inc.SPAR Group, Inc.SS&C Technologies Holdings, Inc.The Middleby Corp.Tribune Media CompanyTutor Perini Corp.Tyler Technologies, Inc.United Therapeutics Corp.Varonis Systems, Inc.Vector Group Ltd.Vista Outdoor, Inc.Westwater Resources, Inc.Wheeler Real Estate InvestmentTrust, Inc.LendingClub Corp.LC-45.8%Willdan Group, Inc.Mallinckrodt PlcMNK37.6%36.6%Williams-Sonoma, Inc.McKesson Corporation *MCK-40.4%Xerox Corp. *MEDNAX, Inc.MD-12.6%Xperi Corp.Total Failures: 70Average change (for companies with data for both years):2019 – 2020:33%* Company is included in S&P 500 Index.1Company failed despite ISS “for” recommendation
S&P 500 say-on-pay failures increase5EXHIBIT 4ISS say-on-pay recommendations and vote results, 2011-2020 (as of May 29, 2020)EXHIBIT 5Number of companies that failed say-on-pay at least once since 2011 (as of May 29, 2020)Number of years failedNumber of companies(all)Number of S&P 500companiesNumber of companiesother than S&P 101Total44655391AuthorsCarol SilvermanPartner, Senior Legal Consultantcarol.silverman@mercer.comAdam BoguckiPrincipal, Executive Compensation Consultantadam.bogucki@mercer.comAmy KnieriemSenior Principal, Senior Legal Consultantamy.knieriem@mercer.comMichael YoonSenior Analyst, Careermichael.yoon@mercer.com
and Proxy advisers weigh in on COVID-19's impact on pay and governance. EXHIBITS 1. Say-on-pay summary results: % in favor, 2011 to 2020 2. Companies with 2020 say-on-pay failures and 2019 results 3. Companies with 2019 say-on-pay failures and 2020 results 4. ISS influence on vote results, 2011 to 2020 5. Number of companies failed say-on-pay at least once since 2011 EXHIBIT 1 Say-on-pay .
