As we began working on proxy statements for calendar year companies last year, I warned, “Be Prepared for Shareholder Proposals on Executive Compensation.” The extremely high success rate of companies’ Shareholder Say on Pay resolutions (and the lack of response by some companies that failed to achieve a majority vote in favor of their SSOP resolutions) seems to be leading shareholders and their advisors back to the shareholder proposal process. The number of shareholder proposals regarding executive compensation has increased each year since 2011.
The most common shareholder proposals relating to executive compensation continue to be requests for the company to:
- Adopt (or improve) a compensation clawback policy, including a requirement that the company disclose whether and when it has recouped compensation from any employees,
- Remove or prohibit the accelerated vesting of equity awards upon a change in control, and
- Adoption of a stock retention policy,
Recently, a majority of shareholders at Valero Energy Corp. and Gannett Co. voted in favor of shareholder proposals prohibiting the acceleration of vesting of executive equity awards in the event of a change in control. Although these resolutions are non-binding, most companies react by adjusting the targeted plan or program.