It’s been widely reported that companies have fared quite well as far as Say on Pay votes have been concerned. Indeed, Semler Brossy Consulting Group reports that, as of April, 94 percent of employers have passed such a vote (with a 70 percent approval rating).
According to researchers at Towers Watson, the answer: smaller companies.
While key shareholder voting outcomes have improved very slightly for the Russell 3000 overall, the analysis found, smaller companies are failing their Say on Pay votes at almost twice the rate as last year. (Towers Watson defines failures as receiving Say on Pay support from less than 50 percent of the votes cast.)
In an article posted Monday on Towers Watson’s website, the authors note:
Through May 24, a total of 27 Russell 3000 companies received failing Say on pay votes from their shareholders. Only two are in the S&P 500. Companies outside the S&P 1500 … accounted for almost two-thirds (63 percent) of the failures. Last year, these smaller companies accounted for only 31 percent of the Russell 3000 failure.”
James Kroll, a senior consultant at Towers Watson and one of the article’s authors, said he isn’t surprised to see shareholders start to shift some of their attention to smaller companies. “We’re most of the way through proxy season and we’ve seen a refinement of efforts at the largest companies—so it’s natural that the focus would start to shift downward in terms of company size,” he said.
In light of this, Kroll said, smaller companies might want to take some cues from their larger peers, including revisiting their disclosures and fine-tuning their messaging so shareholders have a much clearer picture of what’s happening.
Put simply: Be more engaged with your shareholders, something many larger companies have gotten much better at.
And if you’ve failed a vote? “Shareholders,” Kroll said, “are going to be looking at how you’ve responded … .” In terms of responding, he adds, some companies are doing a better job than others.