Pay for Performance Disconnect Cited as Main Shareholder Concern in Say on Pay Vote Failures

New Study by Executive Compensation Firm Equilar Highlights Reasons That Companies Fail Say on Pay

REDWOOD CITY, CA (March 13, 2013) – A recent study by Equilar, the leader in executive compensation benchmarking and governance research, found that a high level of executive compensation coupled with below par relative company performance was the most common reason cited by shareholders for voting against a company’s Say on Pay proposal. In its 2013 Say on Pay Warning Signs Report, Equilar reported that of the 18 companies that failed their 2011 Say on Pay votes and named specific reasons for the failed votes, eight cited shareholder concern about increasing levels of pay and poor relative company performance as the reason for not gaining Say on Pay approval.

Furthermore, the study uncovered key similarities regarding company performance and executive compensation policies in companies that failed their Say on Pay votes in 2011 and 2012. The report states that of the 70 companies that failed their Say on Pay votes in either 2011 or 2012, 58 ranked in the bottom half of their peer groups’ one-year total shareholder return and 44 ranked in the top half of their peer groups’ CEO total direct compensation.

“Although Say on Pay votes are non-binding, their impacts are significant as they’ve begun to reshape the way companies create, disclose, and communicate their executive compensation policies,” said Aaron Boyd, Director of Research at Equilar. “By examining companies that failed their Say on Pay votes in either 2011 or 2012, this report provides insight into some warning signs for potentially failing a vote.”

The report discusses other common issues raised by shareholders when evaluating Say on Pay proposals. These issues include negative recommendations by proxy advisory services, a lack of clear disclosure, special one-time discretionary awards, the choice of performance metrics, and other governance-related policies.

About Equilar

Headquartered in Redwood City, Calif., Equilar is the leading provider of executive compensation data and governance tools for corporations, nonprofits, consulting firms, institutional investors, and the media. As the trusted data and executive solutions provider to 70% of the Fortune 500, Equilar helps companies accurately benchmark and track executive and board compensation, pay for performance results, and compensation practices. In addition, Equilar offers a leading business and event networking solution focused on serving executives and board members. Equilar’s research is cited regularly by Bloomberg, The New York Times, The Wall Street Journal, and other leading media outlets.