Proxy Season Vote Review

The 2021 proxy season (proxies voted between 7/1/20 to 6/30/21) was a record breaker on several levels. A record 16 companies had advisory votes on pay where the majority of shareholder voted against, an increase from the 10 in 2020 and 7 in 2019. On a deeper level, the trends are more remarkable – 32 S&P 500 companies had more than 40% of shareholders oppose executive pay, a fourfold increase since 2017 when only 8 companies saw the same level of opposition. This follows a trend of increasing opposition to executive compensation in the last few years, with 20 companies in 2020 and 14 companies in both 2019 and 2018 seeing the same level of opposition.

Semler Brossy found that for the first time ever the average level of shareholder votes against the CEO pay packages, at all S&P 500 companies, was more than 10 percent, reaching in 2021an all time high of 11.3. Many of the votes were made in objection to awards given in light of COVID. Semler Brossy’s analysis “indicates that special awards granted in 2020 more frequently breached investor and proxy advisor preferred structures for such awards in comparison to prior years.”

The 16 votes from the S&P 500 companies that most shareholders voted against are summarized below, listed by highest level opposition, and include the meeting date and level of opposition. Given that many boards consider a vote against of 70% a failure, these can be considered catastrophic failures. The corresponding explanations for opposition are summaries of those recorded by shareholders on Proxy Insight (a subscription-only service).

Norwegian Cruise Lines                                5/20/2021            83.4% AGAINST

While the company suffered from a $4 billion loss and 80% decrease in revenue, the CEO’s compensation increased. Details, including exorbitant “retention” bonuses, can be found here.

Skyworks Solutions                                        5/12/2021            77.7% AGAINST

Many shareholders voting against this proposal cited failures in pay/performance alliance as reasons to vote against this proposal – particularly the structure of the equity program, which claims to be long-term but can actually be earned on annual performance.

Marathon Petroleum                                     4/28/2021`          69.8% AGAINST

Excessive payments for both departing and incoming executives, as I explained here, were part of the reason for the shareholder rebellion at Marathon Petroleum.

Paycom Software                                            5/3/2021              69.72% AGAINST

Paycom, a company that provides HR services, had the highest reported CEO compensation of the year. As You Sow’s blog noted that the CEO’s reported compensation of $211,131,206 in 2020 was ten times higher than in 2019.

DXC Technology                                               8/13/2020            67.4% AGAINST

As noted above, As You Sow’s CEO compensation reports consider the proxy year to cover July 1st to June 30th because this is the period that SEC vote disclosure covers. At DXC’s August 2020 meeting, shareholders particularly objected to the package received by the departing CEO. Other concerns included overly generous benefits, excessive severance payment, poor performance linkage, and lack of performance-related pay.

Intel                                                                      5/14/2021            61.72% AGAINST

Many shareholders rejected both the magnitude and structure of the compensation arrangements for both the departing and incoming CEO.

General Electric                                                 5/4/2021              57.64% AGAINST

When the company modified an already generous stock award mid-pandemic, it drew both headlines and a concerted opposition to pay (as described here). This was one of a handful of companies where BlackRock announced it would vote against the proposal and compensation committee prior to the meeting. 

Transdigm                                                           3/18/2021            57% AGAINST

Transdigm has appeared on As You Sow’s list of companies with overpaid CEOs for the last four years. For many shareholders, the fact that the compensation committee allowed the performance options of multiple executives to vest despite nonattainment of annual goals was enough of a reason to vote against this proposal.

Howmet Aerospace                                        5/25/2021            55.3% AGAINST

Howmet was ranked 4th on our most recent list of companies with overpaid CEOs, with opposition in 2020 of 47.8%. An explanation for some of the reasons that even more shareholders voted against compensation this year can be found here.

Halliburton                                                        5/29/2021            53.7% AGAINST

Halliburton was a clear case where shareholder opposition increased in response to a sharp uptick in the CEO’s pay. In addition, the company increased the target opportunity of the CEO's long-term incentives when introducing performance equity.

Starbucks                                                            3/17/2021            52.5% AGAINST

Shareholders objected to the CEO’s excessive “special performance cash award” – his 2nd cash award in two years.  As noted in As You Sow’s blog post, the award “can be achieved at target even if the company’s stock price decreases, as long as most of the rest of the market decreases more than Starbucks. Many shareholders would not support a special bonus of $25 million to the CEO of a company that actually lost value.”

Walgreens Boots Alliance Inc.                    1/28/2021            52.45% AGAINST

Walgreens, with its early meeting date, was one of the first indications that shareholders would be looking closely at COVID-related adjustments. The company adjusted both the short- and long-term incentive programs based on COVID impacts, resulting in payouts that would not have been earned if the company had kept its original metrics.

International Business Machines              4/27/2021            51.33% AGAINST

The excessive size and lack of strong performance goals for an award granted to James Whitehurst were the primary reasons that shareholders offered for voting against the proposal.

AT&T                                                                     4/30/2021            51.07% AGAINST

The combined total compensation of the three most highly paid AT&T executives was over $100 million, far higher than that of peer companies. As noted in our blog, the extraordinarily high salary awarded to the new CEO suggests that executive pay will remain excessive in the future.

PTC                                                                        2/10/2021            50.4% AGAINST

PTC, which was added to the S&P 500 in April, has suffered multiple years of low votes with little company response. While minor adjustments were made, several concerns remain. The company granted its CEO a large performance-based equity award to replace the FY18 special award once it became clear that prescribed metrics were longer achievable.

ProLogis                                                               4/29/2021            47.8% AGAINST

Prologis’ CEO pay increased sharply and far beyond what performance would justify. While slightly less than a majority of shareholders cast votes against the proposal, it still officially failed because the company counts broker non-votes and abstentions as votes against the advisory vote.

In the coming weeks I’ll be posting additional blogs about the season. Happy to take suggestions if you have specific questions.