Below is an excerpt from ISS Corporate Solution’s recently released paper “Golden Parachutes Face Investor Scrutiny”. The full paper is available for download from the ISS Corporate Solutions (ICS) online library.
Investor scrutiny of executive “golden parachutes” is on the rise. Amid challenging economic conditions, shareholders and corporate governance advocates are showing increased interest in curbing excessive CEO and executive financial windfalls upon termination.
ISS Corporate Solutions (ICS) found that the third most prevalent shareholder proposal by count this year is “Submit Severance Agreements (Change-in-Control) to a Shareholder Vote,” a variation on “say on golden parachute.” This type of proposal has been increasingly cropping up on companies’ proxy ballots and a handful have even won majority support. There could be more to come.
KEY TAKEAWAYS:
- Proposals calling for a shareholder vote on executive severance agreements triggered by a change in control increased by 156% year over year, making them the third most prevalent shareholder proposal.
- Since January 2020, this proposal has been filed at 61 Russell 3000 companies, and 15% of those have achieved majority shareholder vote support.
- Although shareholder vote support for this type of proposal has been subdued thus far, macroeconomic factors impacting corporate financials, M&A activity, and shareholder returns could influence this proposal’s popularity and traction in the coming proxy season and beyond.
By: Alyce Lomax, Associate Vice President, ISS Corporate Solutions
