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Knowledge Center Reports

The Impact of Say on Pay: Analyzing Changes Following a Failed 2013 Vote

April 27, 2015

One of the most significant impacts of the 2010 Dodd-Frank Corporate Reform Bill was the requirement that all public companies hold regular shareholder votes concerning executive compensation. While the vast majority of companies gain shareholder approval with these votes, the ones that do not offer insight into shareholder opinions regarding the most appropriate way to compensate and incentivize the executives running their companies.

In 2013, 68 companies in the Russell 3000 Index failed their Say on Pay votes. Of those, 62 filed proxy statements the next year, allowing Equilar to analyze the most common and effective amendments made to compensation plans in response to a failed vote. While Say on Pay votes are non-binding, boards were typically responsive to shareholder demands, with 44 of the studied companies modifying their compensation policies in some manner.

The following chart shows the ten most common changes made in response to a failed Say on Pay vote:


The most common action taken by companies following a failed Say on Pay vote was to change the formula used to determine payouts of their incentive plans, either by changing the metrics used to measure performance or by changing the relative weight of each metric. Shifting compensation towards performance-based equity was another popular modification. Twenty-one companies either introduced or otherwise increased reliance on performance-contingent stock in their compensation plans. As a category, these types of changes to the underlying structure of compensation plans were the most common actions taken by companies.


Changes to compensation governance policies were also quite common, occurring in 35 companies. The most popular changes included adding or strengthening clawbacks, modifying peer groups, enacting anti-hedging/pledging policies, and changing stock ownership retention guidelines. Most companies that made governance changes did so on multiple items, with 74% of companies making at least 2 changes.


Shareholders generally approved of company responses, with 78% of companies passing their next Say on Pay vote and over one-third receiving greater than 90% approval. The largest turnaround came from consumer goods manufacturer Helen of Troy, which saw an increase of approval from 12% to 98%. Due in part to a change in the top position, Helen of Troy decreased annual compensation paid to its CEO from $18 million to $5 million for the new chief executive. The decrease was part of an effort to address concerns raised by shareholders in discussions with the company.


Reducing overall target pay for executives was the change that demonstrated the highest correlation with a company passing its subsequent Say on Pay vote. Over 94% of the companies making that change received approval for those compensation packages, compared to a 70% passage rate for those that did not. Companies that shifted towards performance-based equity awards were also highly successful in subsequent votes, with an 89% pass rate for those that made that change and 72% for those that did not.

Some companies declined to make any adjustments in response to the failure of their Say on Pay vote. Of the 18 companies that disclosed no modifications, 9 defended that decision in their 2014 proxy filings. Among the companies that made no modifications, only 65% passed their Say on Pay vote the following year compared with 83% that passed after making at least one modification.

Only three companies received lower support for their compensation plan at their 2014 shareholder meeting than in 2013. The three companies to see their approval rates fall were OraSure Technologies, Patriot Scientific, and RadioShack. Perhaps unsurprisingly, all three companies made limited changes to their compensation practices in the intervening period, with Patriot Scientific and RadioShack making no changes and OraSure Technologies making the sole change of updating its peer group.

Shareholders rewarded the breadth of changes made by companies. A high correlation was seen between the number of amendments made and improvement in voting results. Companies that made no changes, on the other hand, tended to struggle in subsequent votes—over 35% repeated their Say on Pay failure at the next shareholder’s meeting. Shareholders clearly take their Say on Pay votes seriously and seem to be looking for significant changes to compensation plans when they take the step of submitting a vote of disapproval.


Please contact Dan Marcec at for more information. Dan Marcec is the Director of Content & Marketing Communications at Equilar. The contributing author of this paper is Jordan Brooks, Research Analyst.

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