2023 United States Proxy Season Review: Compensation

Below are key takeaways from ISS’ recently released 2023 Proxy Season Review – United States – Compensation. The full report is available to institutional subscribers by logging into ProxyExchange 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.

• Say-on-pay opposition declined following the prior year’s record failure rate. Although the median support level decreased slightly, the say-on-pay failure rate fell by more than a third to just 2%, compared to the prior year’s all-time high of 3.2%. This represents the lowest failure rate since 2017. In addition, the percentage of companies with low say-on-pay support (less than 70%) decreased to 6.6%, compared to 8.6% in 2022.
• Pay returned closer to historical levels, in the wake of record compensation in prior year. Median CEO pay in the S&P 500 was $14.3 million, while median CEO pay in the Russell 3000 (excl S&P 500) was $5 million. Performance equity continued to dominate in the S&P 500, with just 8% of S&P CEOs receiving either no equity awards or only time-based grants.
• The equity plan failure rate hit a 10-year high, and more plans have problematic evergreens. Equity plans on ballots saw the median support level dip below 93% for the first time since 2014, while the failure rate reached a 10-year high of 1.6%. The prevalence of problematic evergreen provisions in equity plans increased, continuing an upward trend in recent years.
• The number of compensation-related shareholder proposals spiked, largely due to a wave of severance proposals. The number of compensation shareholder proposals on ballot jumped by 76% to 58 proposals, although the number receiving majority support remained flat at just four. The four passing votes focused on shareholder approval of severance and termination pay, and a wave of such proposals drove the increase in overall volume.
• Companies disclosed additional data on metrics and “compensation actually paid” under the new pay versus performance disclosure rule. The 2023 proxy season saw the first wave of mandated pay versus performance disclosures, including new data on “compensation actually paid” (CAP) and the most important metrics used to link CAP and company performance. Over 20% of the S&P 500 reported negative CAP for FY22.

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