Seventy-two percent of shareholders called for annual compensation votes in the 2011 proxy season, the first season in which the Dodd-Frank Act mandated non-binding “say on frequency” votes, finds GMI in its final report in its Say on Pay series.
Only 53 percent of management teams recommended annual votes, and 42 percent recommended the maximum triennial votes citing the need for extra time to evaluate the programs, review shareholder input and implement changes.
At the time of GMI’s study, 40 percent of companies had not yet decided which voting frequency to use, 10 percent adopted a triennial policy, 50 percent adopted a annual schedule and only 0.37 percent chose biennial.
“The fact that the management of 42% of companies recommended that the Say on Pay vote take place every three years stands in stark contrast to how 72% of shareholders voted on the issue,” said Greg Ruel, Research Associate at GMI, in a statement on the report’s findings. “That gap shows a real disconnect between how management and boards believe companies should be run and the way shareholders want their companies to be run. We’ll be watching closely to see which policies the remaining 40% decide to adopt.”
The Dodd-Frank Act requires companies poll shareholders at least every six years on whether they want to vote on compensation plans every one, two or three years, or abstain. GMI’s study looks at Annaly Capital Management as a case study, where the board opted to institute a triennial voting policy though the annual option received over 70 percent of non-binding shareholder votes. Almost three-quarters of the company’s investors approved the compensation packages.
GMI analyzed the results of say on frequency votes at 2,176 companies in the Russell 3000, of which 907 companies recommended triennial votes. About half of those 907 companies have not yet announced the official voting frequency, while 23 percent confirmed the triennial policy and 29 percent implemented annual votes. Less than one percent of these companies chose a biennial policy.
For more on the GMI say on pay voting frequency study, please click here.