Some companies think a high TSR is a panacea against negative say-on-pay votes, but the Chipotle 2014 say-on-pay vote proves otherwise. Despite 1, 3 and 5-year TSRs in the 83rd, 77th and 95th percentiles as compared to peers, over 75% of Chipotle’s shareholders voted against the say-on-pay proposal.

Although shareholder unrest appears to have existed quite apart from ISS, it’s interesting to think about how ISS arrived at its “no” vote recommendation, given Chipotle’s high TSR. Of the 3 quantitative “gating” factors used by ISS to screen company say-on-pay proposals, the only one that doesn’t take TSR into account is the multiple of CEO pay as compared to peer median.From ISS’s public statements, it appears that Chipotle’s multiple of 3.4 was indeed considered too high by ISS and a main factor in ISS’s “no” vote recommendation for Chipotle. Other, qualitative factors–such as top executives cashing out of their option positions shortly after exercising–are also cited by ISS, but of course ISS is only supposed to consider qualitative factors if one of the quantitative “gating” factors demonstrates a pay misalignment. Behind the scenes, the near 20% drop in Chipotle’s share price in the months leading up to the annual shareholder meeting may have contributed as well.