The 2021 corporate shareholder proxy-voting season, in which shareholders vote on proxy reports looking back at 2020, is providing a window into executive pay in the US and how that pay is viewed by shareholders and other stakeholders—which ultimately reflects on a company's brand and reputation.
So far, the data suggests that companies need to be as clear and explicit as possible when communicating about executive compensation.
As the annual period when public companies issue their proxy statements and hold nonbinding shareholder votes on executive pay packages (commonly known as say-on-pay) got underway in April, there were signs of shareholder impatience with some executive pay practices used in 2020 during the height of the pandemic.
If companies don't make a serious and well-documented case for executive pay in their proxy reports, particularly if they made midyear adjustments to executive pay targets, it could create a cascading effect on how scrutinized say-on-pay will be in the future.
The discussion around say-on-pay has changed. "The focus is now more specific and nuanced," said Peter Lupo, senior managing director at Pearl Meyer. For example, shareholders are more apt to seek details on the metrics selected for long-term executive incentives.