Most indicators of shareholder support for executive pay programs remain strong, with the number of companies whose 2019 executive pay plans failed to receive majority support at 2020 annual meetings as of July 24 one shy of failures as of this time last year (57 vs. 58). But this could change in 2021 given many companies are considering modifications to in-flight awards and special grants in response to the impact of the pandemic on incentives. How receptive proxy advisers and investors will be to these actions is still unknown but Institutional Shareholder Services (ISS) is currently seeking input from investors and other stakeholders on this topic. 

Reasons for failures. At least one investor continued to take a hard line on say on pay: the California Public Employees’ Retirement System (CalPERS) voted against pay plans at more than half of its portfolio companies that held votes. CalPERS voted against pay plans at 1,165 firms (52% vs. 53% in 2019), according to the Financial Times. The CalPERS votes were based on an analysis of executives’ realizable compensation, which measures how a pay package grows or shrinks in value depending on whether goals are achieved and how the shares move, relative to the company’s stock return over five years. It then compared those figures with companies of similar size or type. Of note, the fund also voted against 2,716 directors in 2020 under a new policy to vote against compensation committee members of the companies whose pay programs it voted against.


Reasons other investors cited for voting against say on pay at the nine S&P 500 company failures, aggregated by Proxy Insight, were also driven by pay-for-performance disconnects, including:


  • Modification of performance targets to make them easier to achieve
  • Lack of quantifiable (vs qualitative) performance metrics
  • Lack of transparency around performance goals, lack of goal rigor, and/or use of discretion
  • One-off equity grants, especially when not sufficiently performance-based
  • Mega grants covering current and future years
  • Payment of cash severance on retirement in lieu of forfeited equity

No surprises despite pandemic. Executive pay decisions for 2019 predated the market gyrations brought on by the COVID-19 pandemic and say-on-pay vote results have been generally unaffected. Most indicators of shareholder support remain strong so far and consistent with prior years:


  • Out of 2,616 all-size companies reporting results, 57 (~2.2%) received less than 50% support, a slightly lower rate than 58 out of 2,528 (~2.3%) as of July 12, 2019. S&P 500 failures are slightly higher than for all of 2019 (nine vs. seven) and each of the prior years except 2012
  • Votes continue to average just over 90% in favor of companies’ executive pay programs.
  • Favorable votes of 90% or higher at individual companies are similar to last year (down slightly from 77% in 2019 to 75% in 2020 for S&P 500 companies and from 73% to 72% for all companies).
  • ISS has recommended shareholders vote against fewer say-on-pay proposals (11% so far this year compared with 13% as of July 12, 2019 and for all of 2019).

Looking ahead. The reasons for the say-on-pay failures indicate areas of concern investors are likely to focus on when they next vote on say on pay, including actions companies take to address the volatile market and global pandemic. Companies whose fiscal year ended June 30 will be the first to see the impact, and should engage with shareholders and ensure their proxy disclosure explains the rationale for pay decisions.

ISS’s just released annual global policy survey seeks input from its investor clients and other stakeholders that the proxy adviser will consider when it updates its voting policies for 2021. For pay actions, the survey seeks feedback on the following:


  • Whether the pandemic is different from previous market downturns, such that boards and compensation committees should have flexibility to make reasonable adjustments to performance expectations and related changes to executive pay.
  • Whether it would be reasonable to take specific actions when annual incentives don’t pay out (e.g., mid-year changes to metrics, targets and measurement periods, or suspending the plan and making one-time awards).

Mercer resources. For more information on alternatives to address nonperforming incentive plans, see Managing incentives during uncertain times and When performance shares are not performing for discussions of 2020 compensation decisions in response to COVID-19 and Proxy advisers weigh in on COVID-19's impact on pay and governance.

Carol Silverman
Carol Silverman

Partner, Senior Legal Consultant

Amy Knieriem
Amy Knieriem

Senior Principal, Senior Legal Consultant

Michael Yoon
Michael Yoon

Senior Analyst

Adam Bogucki
Adam Bogucki

Principal, Executive Compensation Consultant

Speak with a Consultant

Complete the form below to speak with a consultant and gain more insight into Say on Pay.

*Required Fields