Below are key takeaways from ISS’ recently released 2020 U.S. Compensation Proxy Season Review. The full report is available to institutional subscribers by logging into ISS Link then selecting the Governance Exchange and its Report Center tab and to corporate subscribers by logging into Governance Analytics then selecting the Governance Exchange and the Report Center tab.
- The rate of say-on-pay failures decreased, as did the median support level. The 2020 say-on-pay vote failure rate declined following a record high failure rate in 2019. However, median say-on-pay support levels also dropped in 2020 to 95.3 percent, the lowest level recorded since mandatory say-on pay votes began in 2011.
- Median CEO pay levels reached record levels across indexes as a result of larger equity awards. Continuing CEOs in the S&P 500 as well as the Russell 3000 saw overall pay increases that were primarily due to larger long-term equity awards in 2019 that more than offset smaller annual bonuses. The median CEO pay package was at an all-time high in both indexes.
- Performance-based pay elements continue to be emphasized, particularly among the largest companies. The prevalence of discretionary annual bonuses decreased for S&P 500 and Russell 3000 CEOs. The prevalence of performance-conditioned equity awards among S&P 500 CEOs reached an all-time high at 57 percent of the equity pay mix.
- The number of shareholder proposals on compensation topics decreased to its lowest level. ISS identified just 29 compensation-related shareholder proposals in the 2020 proxy season. This is the smallest number of such proposals identified since mandated say-on-pay. One of the proposals – seeking an enhanced clawback policy – received majority support.
- COVID-related compensation decisions expected to dominate next year’s proxy season landscape. As the pandemic arrived in the US during the 2020 compensation cycle, related changes will not be fully disclosed until the 2021 proxy season. Looking ahead, compensation topics in the 2021 proxy season are likely to be defined by mid-year adjustments to incentive programs and use of discretion or one-time awards.