Most Companies Pass Early 2015 Say-on-Pay Votes

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A significant majority of companies that conducted say-on-pay votes from Jan. 1 to Feb. 5 received passing votes, an analysis by an executive-compensation consulting firm showed.

The analysis of the early 2015 process by Steven Hall & Partners LLC showed that two companies failed say-on-pay votes.

Say-on-pay votes, which were designed to be nonbinding votes by shareholders on whether companies' compensation plans for their most highly paid executives were sufficient, were conducted by 77 companies from Jan. 1 to Feb. 5. The results showed that 75 passed and two failed, said Steven Hall, managing director of the consulting firm. The 2.6 percent failure rate was relatively consistent with the overall failure rate in past years.

“The failure rate has been about 2 to 2.5 percent over the period of time that the say-on-pay rules have been in place,” Hall said Feb. 11 in an interview with Bloomberg BNA. “However, when you’re talking to companies and investors, sometimes the votes aren’t about what you’re paying people; sometimes the votes are indicative of other factors.”

If investors approve a company's executive compensation plan in a say-on-pay vote but in the next year show significantly less support even though the company's executive-compensation plan did not change, this could be a shareholder reaction to a decrease in the company's stock price, an expected dividend that was not paid or another negatively perceived aspect of performance, Hall said.

Trends on Failed Votes

The two companies that failed say-on-pay votes, Nuance Communications Inc. and Schnitzer Steel Industries Inc., had passing votes in 2014, Hall said.

In 2015, the owners of 15 percent of Nuance Communications' shares of stock voted to approve the company's executive-compensation plan while the owners of 85 percent of the shares voted against the plan, compared with a vote of 50 percent in favor to 49 percent opposed in 2014, the company's Forms 8-K filed with the Securities and Exchange Commission showed. With regard to Schnitzer Steel Industries, the owners of 24 percent of the company's shares voted to approve the company's executive-compensation plan in 2015 while the owners of 75 percent of the shares voted against the plan, almost a reversal of the vote of 76 percent in favor to 24 percent opposed in 2014, the company's Forms 8-K showed.

More than 3,400 companies conducted say-on-pay votes in 2014, and 66 of those companies failed the votes, for an overall failure rate of about 2 percent, a 2014 analysis by Steven Hall & Partners showed. Among the 66 companies, 52 companies, or 79 percent, had a negative total shareholder return in 2012, 2013 or 2014, according to the consulting firm's total shareholder return data.

Since the inception of say-on-pay voting rules in 2011 under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Pub. L. No. 111-203), numerous companies that failed a say-on-pay vote in one year passed a say-on-pay vote in the previous year, with the owners of at least 90 percent of the shares voting to approve the executive-compensation plan, Hall said. In 2014, about 20 percent of the companies that failed say-on-pay votes received approvals in 2013 with the support of owners of at least 90 percent of shares, he said.

“What we all assumed say-on-pay was supposed to be was an assessment of whether investors like the structure of a company's pay program and its mix of pay vehicles,” Hall said. “It’s strange to think you could go from 90 percent-plus approval to failing in a year.”

The percentage of failed say-on-pay votes in 2015 is expected to be about 2 percent after votes are completed, Hall said. The failure rate would be in line with the 2 to 2.5 percent in recent years, he said.

For more information, see Compensation and Benefits Library's “Executive Pay Disclosure Rules” chapter.

To contact the reporter on this story: Howard Perlman in Washington at

To contact the editor on this story: Michael Trimarchi in Washington at

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