Below is an excerpt from ISS-Corporate’s recently released paper “What Falling MSoP Support Says About Investor Expectations”. The full paper is available for download from the ISS-Corporate online library.
Shareholder support for Management Say-on-Pay (MSoP) proposals has declined steadily since 2019 even though U.S. company performance, as measured by Total Shareholder Return, consistently improved.
ISS-Corporate analyzed the relationship between MSoP votes and TSR, CEO compensation, and other pay components over from the beginning of 2019 to July of this year to uncover the possible causes of this rising investor discontent. We looked at the components of pay packages, including how much is based on performance, the mix between stock and cash awards and the total amount of compensation.
- Shareholder support for Management Say-on-Pay (MSoP) proposals has continually declined since 2019 across the broader U.S. market, even though TSR performance was positive overall.
- The decline in support seems to be primarily driven by the overall magnitude of pay, which has increased in four of the five years analyzed by ISS-Corporate.
- There was little correlation between MSOP shareholder support and the number of Russell 3000 companies that provided majority-based performance compensation.
- Our research suggests that the design of the compensation program can mitigate some investor concerns.
Issuers were active in their shareholder engagement and improved disclosures following a year of high failures and close calls on MSoP proposals.
By: Carmen Luk, Senior Associate, Compensation & Governance Advisory, ISS-Corporate
Christian Darmanin, Associate, Compensation & Governance Advisory, ISS-Corporate