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This proxy season, US regulators let more shareholder-led proposals about executive pay matters through to be voted on at annual general meetings at S&P 500 companies than in prior years, according to industry watchers.

Companies have a right to petition the Securities and Exchange Commission to exclude shareholder-led proposals from their proxy statements if the issues presented pertain to ordinary course of business matters or are not material to the company’s operations.

However, the agency released a staff legal bulletin in November of last year stating it would narrow its view of matters considered outside of the purview of shareholders.

Consequently, more shareholders filed resolutions addressing their concerns about environmental, social, and governance issues, as well as executive compensation matters that made it onto corporate ballots this proxy season. 

Jannice L. Koors, a senior managing director with Pearl Meyer, said that although the agency may be more receptive to investor-led proposals concerning ESG, boards should exercise their best judgment when the need arises to make changes to compensation packages to drive results.

“Ultimately what you need for that incentive plan to do is drive actions and behaviors, and if the world changes because of something outside of your control and it becomes obvious that the goals that we’ve set in a pre-pandemic world are completely unachievable, then what’s the point of it?” asked Koors. “An incentive plan that the entire management organization views as completely unachievable is no longer an incentive plan. In fact, it becomes a disincentive plan, and that’s not in the shareholders’ best interest.”

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